The Power of Postponement

We are quickly approaching the Weekend Word’s 5th anniversary.  We started this blog in early 2016 in hopes of being able to provide our clients, friends, and family some timely input on various aspects of the financial sphere.  During that time, we have managed to send out 247 weeks of consecutive Weekend Words.  If you have been on this rollercoaster with us for that long there is no doubt you have heard us talk about investing early, the power of compounding and how important those key factors can be in attaining your retirement goals. 

The premise is that Robert and Stephanie are both looking to save for retirement.  Stephanie contributes $100 a month for 10 years, while Robert waits 10 years and then contributes $100 a month for 25 years.  Despite contributing almost 3 times the amount Stephanie did Robert ends up with less money in the long run.  The idea is that investing early and letting your money compound is the backbone to successful investing.  Obviously, it’s not always that straight forward.  In this case Robert might not have been able to comfortably contribute when he was younger thus leaving him behind the eight ball and potentially not prepared for retirement. 

A common misconception is that the only way Robert can catch up is to be more aggressive and take risks he might not be comfortable with to get greater returns.   That isn’t the case though; there is a super simple and incredibly effective technique to close the gap in just a few short months.  All it takes is… ready for it?  Just postpone retirement a little bit… that’s it.  No special product, no miracle cure, just delay your retirement.  Studies show that delaying your retirement by 6 months can have the same impact as saving an additional 1% a year for 30 years.  I know that seems too easy, but by postponing retirement, you can get higher Social Security benefits, contribute more to your retirement plan, allow your retirement plan to grow and potentially avoid paying for health insurance before Medicare.

No one wants to postpone their retirement but by punching the clock for just a little while longer you can potentially cover up some gaps from yesteryear. Tough years like this one can really put people into unexpected binds; knowing your options as you approach retirement can make all of the difference when the time comes.  So as 2020 winds down and you find yourself unsure of how your plan looks, we can help evaluate.