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Mint
26-07-2025
- Business
- Mint
The case for taking mini retirements along the way in your career
Calli Brannan, 30, had been working for a grocery deals app for four years when she realized she needed a break. The start-up had grown since she joined, she was satisfied with what she had accomplished as vice president of customer success, and she was about to plan her wedding. A few weeks of paid time off weren't going to cut it; she needed to step away from her career to regroup. 'It was a bit of a risk but I knew I needed to take this time if I wanted to be able to continue on in corporate or start-ups or start my own business," said Brannan of Royal Oak, Mich. 'I was ready for my next step." She is now a little over a month into a sabbatical that she plans to extend into fall. Brannan isn't alone. Many millennial and Gen Z workers are opting to take a temporary step back from their jobs for as long as months at a time. The trend has been dubbed 'mini-" and 'micro-retirements" or simply sabbaticals. Social media is filled with young professionals talking about voluntarily quitting their jobs, asking for unpaid time off or taking a long pause before job hunting after a layoff. One in 10 Americans are planning one of these breaks in 2025, according to a survey of 1,000 workers from job board The problem: The average micro-retiree doesn't have as strong a financial plan in place as they should before taking a step back from work, says financial coach Annie Cole, who has worked with people taking these career breaks. She is founder of the resource website Money Essentials for Women. 'When not planned well, you're going to feel the pain not only way down the road in your financial future but potentially a year or two from now," Cole says. 'If you pull a lot of money from your investments to have this fun moment and then you come back a year later and are suddenly going to have to work five to 10 more years to make up for that, that's a huge reality check moment that's going to cause a lot of shock and pain." Burning through money for your retirement—especially when it is decades away—can be tempting when you are desperate for a break. It isn't a great idea. Missing just a few of the market's best days can take a massive chunk out of your savings: A $10,000 investment in the S&P 500 would have grown to $71,750 between Jan. 3, 2005 and Dec. 31, 2024 if it stayed fully invested, but just $32,871 if it missed the market's 10 best days and $12,948 if it missed the 30 best days, according to J.P. Morgan Asset Management's Guide to Retirement. Add to this the taxes and penalties you face from yanking money early from retirement savings accounts like 401(k)s, and it's clear why you should avoid going this route. But it's also possible to stay more or less on track with your contributions, despite taking time off. Linda To Yonemoto, 38, had been working in marketing for 14 years when she was wrestling with the death of her grandfather and dog, as well as her own near-death experience during open abdominal surgery, and decided she needed a break. Yonemoto, who is based in Las Vegas, revved up her savings so she could max out her 401(k) retirement contributions in 2023 before she took off for a four-month trip across Southeast Asia and an eight-month break in the U.S. 'It gave me a lot of peace of mind," Yonemoto says. She now has saved and invested enough so that she could retire permanently if she wanted to. Taylor Anderson, a financial advisor in Vancouver who works with workers taking sabbaticals, says that a lot of people focus on budgeting to cover their living expenses during their time away from work. But she says that it is equally important to take a long-term view, taking advantage of tax-savings opportunities and saving in multiple accounts. That could include having your sabbatical span two tax years so that there is income in both years, making you still eligible to contribute to IRAs and Roth IRAs but with a lower tax bracket due to the lower income. It can also include converting pretax savings to a Roth IRA at a lower tax rate, Anderson adds. Or you might rebalance after-tax accounts with concentrated positions by selling winners and paying lower capital-gains during a period of low income. She says it also is essential to have a buffer in your budget for the time away, especially if you are traveling, since unexpected expenses will come up. She learned this the hard way after a career in information technology consulting during her own 'mini retirement"—which included 20 months as a volunteer in Kyrgyzstan with the Peace Corps and six months of traveling. She had to lay out $1,000 for an unplanned helicopter flight necessary to get out of the mountains in Nepal due to a cancelled flight that left her with the choice of waiting days for open seats on another flight or hiking for four days. Anderson, who was 29 when she started her sabbatical in 2013, also recommends saving enough for three- to six-months' worth of expenses for your re-entry back into the job market, since it can often take longer than you think to find a new gig. Brannan prepared for her time off while staying on track for a more permanent retirement down the line by selling a house she had been renting out in Florida to make sure her expenses would be less once she wasn't working (the money she was making by renting the house didn't cover the mortgage). 'I want to join the workforce again with that renewed excitement and dedication so I can grow my savings and retire permanently as soon as possible," she says. Write to editors@
Yahoo
22-05-2025
- Business
- Yahoo
Think you'll retire at 65? You may need a backup plan.
Listen and subscribe to Decoding Retirement on Apple Podcasts, Spotify, or wherever you find your favorite podcasts. Do you plan on working to 65 or perhaps even later? If so, it would be well worth coming up with a backup plan. While 70% of people plan to work until 65, less than 30% actually do, according to Michael Conrath, chief retirement strategist for JPMorgan Asset Management. In fact, most retire by 62. "It's a big gap," Conrath said in a recent episode of Decoding Retirement (see video above or listen below). "It just shows people have plans, and then life comes at them and things change." This embedded content is not available in your region. Sometimes, people make retirement decisions that are entirely within their control, Conrath said. But that's not always the case. Your company may downsize, or you may experience a health problem or disability. Sometimes, you become a caregiver. There could be any number of reasons, according to JPMorgan's Guide to Retirement. "What people have in mind years before retirement may not be where they land," he said. "So you've got a plan for those what-if situations." Read more: Here's what to do with your retirement savings in a market sell-off At the same time, a significant number of workers will stay on the job. More than 27% of those ages 65 to 74 are still in the workforce, and even among those 75 and older, over 8% remain employed. "Retirement is no longer this binary decision to work or to retire," Conrath said. That shift is clearly visible in the data. Using anonymized information from Chase banking customers, Conrath noted that the firm found that 53% of households are partially retired. These individuals are drawing from sources like Social Security, pensions, or annuities while still earning some wage income. "There's this hybrid approach," Conrath said, and it comes with nuances. Some people continue working simply because they enjoy it. "They love what they're doing," he said. "They love the social elements ... they have a purpose." But others remain in the workforce out of necessity. According to Conrath, partially retired households tend to carry more debt and spend more, which influences their retirement timing. As a result, this group often transitions to full retirement later than those who retire all at once. "They're working to be able to maintain that spending but also pay off their debt," he said. A key part of planning is preparing for a time horizon that could span 35 years or more, partly due to living longer but also because you may retire sooner than expected. "I think a lot of people, when left to their own devices, will sometimes plan based on averages," Conrath said. "But you generally need to plan for a long life." If you planned to retire at 65 but ended up leaving the workforce at 62, that shift raises important questions. Retiring just three years earlier might not sound like a big deal, but financially, it can make a significant difference, as you'll have fewer years to save and more years to fund. That's why it's important, Conrath said, to carefully consider your options. You might look at claiming Social Security earlier, but that comes with trade-offs. Alternatively, you'll want to assess whether your portfolio or other sources of income can help you bridge those extra years before full retirement benefits kick in. This is where retirement savings checkpoints can help workers gauge whether they're on track to fund their lifestyle in retirement. Take, for instance, a household with an income of $80,000, which is roughly the median in the US for 2023. In that scenario, JPMorgan's Retirement Guide suggests that a 30-year-old should have $90,000 saved for retirement, while a 65-year-old should have $615,000 saved (see chart below). Read more: How much money should I have saved by 30? These checkpoints are meant to be a starting point for the conversation, Conrath said. According to JPMorgan's research, about 56% of US households haven't even done a basic calculation to figure out how much they'll need for retirement. If you find you're not on track, the aim of these checkpoints isn't to induce fear or shame — it's to provide clarity and guidance. And once you know where you stand, Conrath said, you can start taking steps to move closer to your retirement goals. Conrath also highlighted how retirement spending doesn't follow a straight line, contrary to what many assume. "I think historically people have thought that spending is this linear progression and you just spend to keep pace with inflation," he said. In reality, retirement spending tends to follow a "smile" pattern, Conrath said. Spending is typically higher in the early years, driven by travel, leisure, and lifestyle pursuits. It declines in the middle phase of retirement, and then rises again later in life, largely due to increasing healthcare costs. "So, spending is not linear," he said. "It adjusts over time. But it's important to have a strategy that's dynamic and flexible so you can account for that." The key, Conrath emphasized, is preparing for both the expected and the unexpected. That means creating a plan that not only funds long-term goals but can also adapt to near-term spending needs and lifestyle changes. A time-honored rule of thumb suggests that you should plan on needing 70% to 80% of your pre-retirement income during retirement to fund your lifestyle. But in fact, JPMorgan's research found that this conventional wisdom is not applicable to many households. "These so-called rules of thumb, 70%, 80%, they can feel a bit broken," he said. Read more: Retirement planning: A step-by-step guide In fact, income replacement needs vary significantly by household income. For example, those earning around $30,000 before retirement may need to replace as much as 104% of their income to maintain their standard of living, while households with a pre-retirement income of $300,000 may only need to replace about 55%. One reason for this is simply differences in spending patterns, Conrath explained. Lower-income households typically spend all the income they receive out of necessity. In contrast, higher-income households tend to save more, which is encouraging given the size of the financial needs in retirement. Another consideration is inflation, which often creeps up gradually and can quietly erode your portfolio and your purchasing power over time, Conrath said. That's why it's important to analyze inflation both broadly and by spending category. "Not only do people spend differently in different ways over time, but things inflate at different rates as well," he said. One area that deserves special attention is healthcare — particularly Medicare — since its costs have historically increased much faster than overall inflation. In fact, Conrath said many advisers treat healthcare inflation separately in their planning models, often using an annual estimate of around 6%, which aligns with projections from the Medicare Trustees Report. As people age, healthcare needs typically grow, along with costs. That makes it critical to account for higher healthcare expenses in the later years of retirement, including the potential need for long-term care. Each Tuesday, retirement expert and financial educator Robert Powell gives you the tools to plan for your future on Decoding Retirement. You can find more episodes on our video hub or watch on your preferred streaming service. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Forbes
22-04-2025
- Business
- Forbes
Two Popular Retirement Myths And How They Can Hurt Retirement Security
There are numerous myths, rules of thumb, traditions and other shortcuts surrounding retirement planning. Fallacies and poor assumptions are behind many of them. Using the shortcuts can reduce your financial security in retirement and make it harder for most people to have successful retirements. Yet, these traditions are widely-accepted and widely-used. Two widespread myths concern when people retire and how much of their employment income they need to replace in retirement. Actual experience differs from the traditional beliefs and many people's expectations, as demonstrated in the recent 'Guide to Retirement' from J.P. Morgan Asset Management. Most pre-retired people think they'll retire at age 65 or beyond. Surveys indicate about 70% of Americans don't expect to retire before 65. But the experience of retired Americans is very different. The median retirement age of current retirees is age 62, and only 28% retired at 65 or later. Most of the reasons people retired earlier than originally intended were out of their control. Downsizing or other changes at employers accounted for 32% of early retirements, and another 13% retired early because they were offered an early retirement package or incentive. Personal health issues led to 31% of early retirements, and health issues of a spouse or other family member caused an additional 13% of earlier-than-planned retirements. Only 39% of current retirees left the workforce early than planned because they realized they could afford to, and another 19% retired before 65 because they wanted to do something else. Most of those who continue to work after 65 do so because they want to. Staying active and involved was the reason 52% of older workers gave for staying in the labor force, while 38% said they enjoyed working. Another widespread myth is the replacement ratio. That's the percentage of the final year's employment income a retiree needs to pay expenses in retirement. A common retirement rule of thumb is that people should plan on a replacement ratio of 80%, meaning their retirement income should be 80% of their last year's income from working. The data show the issue is more complicated than the rule of thumb. The lower one's final employment income, the greater the replacement ratio. Someone who earned $30,000 or less before retiring needs a replacement ratio of 104%, according to the J.P. Morgan Asset Management study. The replacement ratio doesn't fall to 81% until the final working income was $80,000. Someone with a final earned income of $200,000 has a replacement ratio of only 60%, according to the report. It's important to recognize that these are only averages. Spending varies considerably from retiree to retiree, even when two retirees have similar earnings histories and savings. It's important to determine the lifestyle you want in retirement and make a solid estimate of how much that will cost. Different people can want wildly different retirement lifestyles, and the cost can vary just as wildly. Also, for many people the level of spending changes through retirement. Typically, spending is relatively high in the first years of retirement but steadily declines as people age. It's important not to use rules of thumb, other people's experiences or similar guidelines in your retirement plans. Realize that every person's situation is different and that every plan needs flexibility for contingencies and changes.
Yahoo
04-03-2025
- Business
- Yahoo
J.P. Morgan Asset Management Releases 2025 Guide to Retirement
13th edition of Guide explores key themes that will impact retirement planning this year, including Social Security and guaranteed income NEW YORK, March 4, 2025 /PRNewswire/ -- J.P. Morgan Asset Management today released the 13th edition of its annual Guide to Retirement. This year's Guide offers a fresh perspective on the evolving landscape of retirement planning, focusing on key themes such as Social Security, guaranteed income, and the importance of long-term investment strategies. It also includes a new section on Social Security/Health, highlighting the important role these topics play in shaping retirement planning discussions. By utilizing anonymized household data and proprietary research, the Guide provides actionable insights to help advisors, consultants, defined contribution plan participants and sponsors navigate unforeseen retirement roadblocks and improve retirement outcomes. "Retirement means different things to different people, and planning for it involves a multitude of decisions which can feel daunting or overwhelming. However, the core principles of a secure retirement are approachable and within reach. It's more important than ever to empower individuals with the tools and knowledge they need to secure their retirement future," said Michael Conrath, Chief Retirement Strategist at J.P. Morgan Asset Management. "The 2025 Guide to Retirement offers a comprehensive look at how retirement planning is evolving. It enables advisors and their clients to make informed decisions that align with their long-term goals, giving them the confidence to achieve their saving and spending targets." Sharon Carson, J.P. Morgan Asset Management Retirement Strategist, added, "The ability to simplify the answers to the most common retirement planning questions is crucial in today's rapidly evolving financial landscape. With the Guide to Retirement, our goal is to shed light on the most salient retirement issues facing U.S. retirees, such as why it is important to invest over the long-term and what they should consider regarding their Social Security benefits. Our proprietary research can help individuals at all life stages enhance their retirement plans and financial security." Below are four key themes featured in the 2025 Guide to Retirement: Theme #1 - Don't plan to be average – know your savings goal. It is important to plan for a longer life expectancy, which could mean 35 years in retirement. More than half of female non-smokers in excellent health will pass age 90, and 4 in 10 healthy non-smoking men are expected to do the same. Given this, understanding your savings target and investing a portion of your retirement portfolio for growth is important to maintain purchasing power over time. Theme #2 - Savings alone won't fund retirement – invest for the long-term. Emotional reactions to market declines can harm portfolios since the best days are likely to occur close to the worst days. Missing the 10 best days of the market over the past 20 years would have reduced a portfolio's annualized return by almost 50%, missing the top 40 days would have a negative annualized return on the original investment. Staying invested with a diversified long-term investment strategy tends to produce a better retirement outcome. Theme #3 - Know what to expect from Social Security. Our research indicates that waiting until age 70 to claim Social Security can boost benefit checks by 24% compared to claiming at full retirement age for those born in 1960 or later. On the other hand, starting benefits early at age 62 means receiving only 70% of the full retirement amount, resulting in a permanent reduction. It's crucial to understand the benefits and tradeoffs of claiming decisions. Theme #4 - Adopt a retirement income plan that gives you confidence to spend. More guaranteed income may equal less fear of spending. A typical household might fund their retirement from a mix of investment accounts plus guaranteed income sources. Our research shows that having more guaranteed income may result in increased spending in retirement, for households with similar levels of total retirement wealth. This may be because people feel comfortable spending Social Security pensions and annuities while they are more reluctant to spend the capital of their portfolio. J.P. Morgan Asset Management helps financial advisors serve their individual clients, DC plan sponsors and plan participants by offering industry-leading insights such as the Guide to Retirement, Guide to the Markets, Long-Term Capital Market Assumptions and spending and saving research in collaboration with the Employee Benefit Research Institute (EBRI). The firm also provides a one-stop-shop of digital tools and resources including Target Date Compass® and Core Menu EvaluatorSM. To view the full 2025 Guide to Retirement, click here. About J.P. Morgan Asset Management J.P. Morgan Asset Management, with assets under management of $3.6 trillion (as of 12/31/2024), is a global leader in investment management. J.P. Morgan Asset Management's clients include institutions, retail investors and high net worth individuals in every major market throughout the world. J.P. Morgan Asset Management offers global investment management in equities, fixed income, real estate, hedge funds, private equity and liquidity. For more information, visit: About JPMorgan Chase JPMorgan Chase & Co. (NYSE: JPM) is a leading financial services firm based in the United States of America ("U.S."), with operations worldwide. JPMorganChase had $4.0 trillion in assets and $345 billion in stockholders' equity as of 12/31/2024. The Firm is a leader in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing and asset management. Under the J.P. Morgan and Chase brands, the Firm serves millions of customers in the U.S., and many of the world's most prominent corporate, institutional and government clients globally. Information about JPMorgan Chase & Co. is available at View original content to download multimedia: SOURCE J.P. Morgan Asset Management
