The financial struggles of unplanned retirement
From: www.foxbusiness.com
Monica wants to rest her tired, swollen feet. The 86-year-old retiree walks slowly to her old loveseat and sits down carefully. The purple paisley-patterned furniture has provided her with comfort for many decades. The loveseat is in fair condition but is showing its age. Once a part of a luxurious three-piece living room set; cardboard panels have since been placed under the seat cushions to prevent them from sagging. The aging cushions are doing double duty and serving as a storage drawer of sorts. In between the folds, everything from old bills, family pictures, junk mail, and prayer cards can be found. Two chenille pillows with matted fringes decorate both ends of the small sofa. The loveseat has seen better days. So has Monica. 16 years ago, not only was Monica forced to retire unexpectedly, she was not financially prepared for retirement at all.
A survey by Transamerica Center for Retirement Studies found on average Americans are retiring at age 63, with more than half indicating they retired sooner than they had planned. Among them, most retired for health or employment-related reasons.
In 2002, Monica's career as a nurse’s aide came to an end. (Monica’s name has been changed to protect her identity.) After suffering through pain for months, she was diagnosed with a herniated disc in her back. Monica received surgery, but never fully recovered. While she was 69 years old when she retired, Monica was not financially prepared to stop working. She did not have a pension or 401(k). Monica had very little savings to speak of. Social Security is her only source of income. Currently, she receives almost $15,000 a year in Social Security benefits; $12,000 less than what she earned when she was working.
“Retiring earlier than planned can have some serious implications for their overall financial situation in retirement,” says Catherine Collinson, chief executive officer and president of Transamerica Institute, a non-profit private foundation which includes Transamerica Center of Retirement Studies. “They are missing out on the income they would have earned up until their planned retirement. Also on retirement benefits that they would have received from their employers and accruing of Social Security benefits. It also means that they will potentially have longer retirements and will need to make their savings last.”
Monica remembers learning about the importance of saving when she was a young girl. She admits she dropped the ball when it came to planning for her retirement.
"I was negligent," Monica says sadly. "I was not informed. I was more concerned with my expenses and wanted to have more money in my pocket.”
