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Retiring Early May Sound Great, but for Most People It’s a Big Money Mistake, Harvard Economist Warns

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What are the worst money mistakes a person can make? If we thought about it, most of us could come up with a list of several bad financial moves – investing money on an uneducated hunch, or buying something you don’t understand (cryptocurrency, for example), or counting on lottery winnings to fund your retirement. All of these are bad money decisions, it’s true.

But what if something many of us treat as an aspirational goal actually qualifies as one of the worst money decisions we can make? Would that change how we think about our retirement hopes and dreams?

We’re talking here about early retirement. Millions of Americans daydream about walking away from the workplace in their 50s or younger, with enough money to enjoy a life of leisure. But the reality is far different. In fact, in this MoneyWise article we recently discovered, well-respected Harvard economist Laurence Kotlikoff argues persuasively that retiring early is one of the worst financial decisions any of us can make.

Let’s take a look and see why Kotlikoff feels so strongly. We’ll also share a wise perspective from Rajiv Nagaich, who points out that the absolute best way to decide what your financial future will look like – including the decision on when to retire – is by using a tool called a financial dashboard. Read on for the full story! (This MoneyWise article was written by freelance contributor Chris Clark.)

Retiring Early – and Unprepared!

“Retire early? As the old saying goes, that’s good work if you can get it,” Clark begins. “But as a respected economist notes, too many Americans are getting it without saving enough for it. With office life reduced to remote working and the stock market driving up 401(k) accounts, early retirement has become one of the most searched terms on the web.”

The “respected economist” is Harvard’s Laurence Kotlikoff, whose views we’ve featured before here on the Blog. As Clark relates, Kotlikoff calls early retirement “one of the worst money mistakes” you can make. But why?

“For starters,” Clark answers, “the market has retreated, erasing many of the pandemic’s gains and waking many from their early retirement dreams. But the reasons for Kotlikoff’s skepticism go deeper.”

“We Are Lousy Savers”

When it comes to savings, we all have good intentions. However, Clark writes, “Few things expose one’s money habits like retirement planning. Aggressive, ritual savers who started early are rewarded with reliably rising account balances, supercharged by dividend reinvestments and compounding interest.”

But for most, the savings picture is far different. “The reality,” says Clark, “is that millions of Americans simply aren’t putting enough away for traditional retirements, let alone the early exits pondered by 50-somethings. Kotlikoff warns that this failure to save adequately will demand that hopeful early retirees either “adjust their expectations or give up the plan altogether.”

The problem is straightforward. “We are, as a group, lousy savers, making early retirement unaffordable,” Kotlikoff wrote in a guest column for CNBC last year. “Financially speaking, it’s generally far safer and far smarter to retire later.”

Of course, Clark does point out that Kotlikoff himself never has desired early retirement. “It should be noted that Kotlikoff ends his argument by stating he plans to ‘die in the saddle’ because he loves what he does,” Clark writes. “But those tired of corporate climbing or reporting to a manager may have different plans for their golden years. How many are truly ready for it?”

Meager Savings Meet Rising Health Care Costs

It’s not hard to find evidence of America’s retirement savings shortfall. Clark quotes a Federal Reserve survey of older savers (those between the ages of 55 and 64) who reported that the median value of the average retirement account was about $134,000. That’s nowhere near enough to fund retirement as life expectancies rise, inflation pressures remain, health care costs increase.

“Another study published by the Center for Retirement Research at Boston College in 2022 found a significant disconnect in how would-be retirees perceive the effects of market volatility and longevity when calculating their post-work plans,” Clark writes. “The report found that many overestimate the effect of market gyrations and pay less attention to how long they’ll live and how much that longevity will affect their finances.” (We’ve written about this before here on the Blog.)

 As the article warns, unexpected health expenses and the cost of long-term care represent a major economic disruption that most retirees will have to face eventually. In the Boston College study, author Wenliang Hou concluded, “[L]ong-term care is also a significant risk faced by retirees, but one they often underestimate.”  He calls the risk to those who are financially unprepared “potentially catastrophic.”

Social Security is a Shaky Safety Net

As Clark observes, at least in the short term there are encouraging signs for Social Security recipients. Benefits saw major cost of living increases in 2023, although projections for 2024 are significantly more modest as inflation cools. Social Security rules also work to the benefit of recipients who wait to tap the system, which is something many early retirees don’t want to do.

But there are storm clouds ahead. “Social Security is currently on a timer,” Clark says. “Without changes at the federal level, economists estimate the main fund that supports Social Security will run low by 2034.” This could trigger a benefit reduction estimated at 22-23 percent. That’s one reason economists have warned retirees not to rely too heavily on Social Security. Instead, Clark writes, “many of them urge investors to build retirement plans that assume the program will be gone.”

Kotlikoff and others agree that delay is the best Social Security strategy. “The main advice from Kotlikoff — as well as others when it comes to retiring or tapping Social Security benefits — is to wait,” says Clark, “and instead consider upping your savings and investments while you continue to work. The additional time will keep your investments working harder and longer, and delaying Social Security benefits means a bigger monthly payout down the road.”

This advice would seem to make the goal of early retirement even more elusive.

Expert Advice from an Objective Professional

Clark recommends that, before you get too far down the retirement path, you seek wise advice from a professional planner. “Setting yourself up for a comfortable retirement is nerve-racking — especially with consumer prices and interest rates still stubbornly high,” he writes. “One solution to help you sleep better: Find a financial adviser who can help navigate your finances, keep your retirement plans on track and make sure your assets are safeguarded.”

Here at AgingOptions and Life Point Law, we agree. But we would quickly add that the best planner is one who will work with you to prepare what Rajiv Nagaich refers to as a financial dashboard. This tool is indispensable when it comes to making informed retirement decisions in all the critical areas of spending, saving, and investing. “A financial dashboard is the next best thing to a crystal ball that actually works,” Rajiv explains. “It allows you to run all sorts of ‘what-if’ scenarios – what if you retire early, what if inflation goes up or down, what if the market has a big adjustment, and so on. Then you can make an informed choice without the guesswork!”

If you’ll contact us, or attend one of Rajiv’s informative seminars, we’ll share more about this highly important breakthrough in retirement planning.

Breaking News: Rajiv’s New Book is Here!

We have big news! The long-awaited book by Rajiv Nagaich, called Your Retirement: Dream or Disaster, has been released and is now available to the public.  As a friend of AgingOptions, we know you’ll want to get your copy and spread the word.

You’ve heard Rajiv say it repeatedly: 70 percent of retirement plans will fail. If you know someone whose retirement turned into a nightmare when they were forced into a nursing home, went broke paying for care, or became a burden to their families – and you want to make sure it doesn’t happen to you – then this book is must-read.

Through stories, examples, and personal insights, Rajiv takes us along on his journey of expanding awareness about a problem that few are willing to talk about, yet it’s one that results in millions of Americans sleepwalking their way into their worst nightmares about aging. Rajiv lays bare the shortcomings of traditional retirement planning advice, exposes the biases many professionals have about what is best for older adults, and much more.

Rajiv then offers a solution: LifePlanning, his groundbreaking approach to retirement planning. Rajiv explains the essential planning steps and, most importantly, how to develop the framework for these elements to work in concert toward your most deeply held retirement goals.

Your retirement can be the exciting and fulfilling life you’ve always wanted it to be. Start by reading and sharing Rajiv’s important new book. And remember, Age On, everyone!

(originally reported at

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