The Workaholics Anonymous website has a quiz to determine if you are a workaholic. The 12-step program was created to help people stop working so much. Many will never seek such help; a work satisfaction poll conducted by The Gallup Organization revealed that Americans are happy to work more for the prospects of rewards. Regardless of whether or not you want to change, your work addiction presents retirement planning problems and you should reconsider the way you save for retirement since retirement may never happen. The following are things that may be different for the workaholics out there.
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- You May Not Stop Working Until You Physically Can't
The Japanese are often cited for their relentless work ethic, but it results in high rates of stroke and heart attack deaths according to WebMD author, Sid Kirchheimer. Health insurance is more important for workaholics to keep from spending your life savings on medical bills. For lingering illnesses or treatments not covered by insurance, maintain a portion of your retirement portfolio that can be easily liquidated such as money market funds. (Learn more in Find Secure And Affordable Post-Work Health Insurance.) Also consider maintaining a cash balance in a permanent life insurance policy; the life insurance portion will still be intact.
- You Will Have a Shorter Retirement Period
All the normal calculations for retirement assume an average age at which a person will stop working and start spending their nest egg. Those numbers may not fit your retirement philosophy as a workaholic. Since you may not intend to have a long retirement, you may be tempted to save less, but consider the tax consequences first. Avoid plans that force you to withdraw your money when you really don't need it.
- You May Never Drop to a Lower Tax Bracket
Take advantage of any tax breaks you can now. That means it still benefits you to put money into a tax-deferred plan. It just needs to be one that is flexible enough to allow you to choose when to use the money. (Learn more about paying less taxes in 10 Most Overlooked Tax Deductions.)
- You May Not Have Enough Time to Use the Money
Workaholics are special because not only do they intend to work until they drop, they don't take the time to spend their money while they are young. There are two ways to look at this issue. Some workaholics may use their income to compensate for the guilt of not spending time with spouses or children, Brian E. Robinson PhD explains in his book, "Chained to the Desk". Other work addicts simply don't believe they need a lot of money. No need for a dream house, when you're never home. They never take lavish vacations and have no real hobbies to splurge on. So where will the retirement money eventually go? If it passes to heirs, make the best moves now to help your survivors benefit from all your hard work. Roth IRAs allow easy transitions to beneficiaries who can treat the retirement account as their own. (Learn more in Roth IRA: Back To Basics.) The asset allocation should reflect needs of the heirs. For example if bequeathing to a nephew who is a minor, consider more aggressive investments with opportunities for growth. Just because you don't intend to spend the money yourself, doesn't mean you should ignore it. The list of beneficiaries and alternate beneficiaries must be kept current and adjust the portfolio holdings as the outlook for your investments change. (For more on setting up your heirs, check out Getting Started On Your Estate Plan.)
The Bottom Line
Even in the aftermath of a recession there are some people who couldn't stop working if they wanted to. If you are more likely to work yourself to death than out live your money, the best retirement plan lets you take money out whenever you want with no penalties and low tax consequences. Since you may never actually spend your entire savings, choose retirement investments that benefit your heirs.
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