In a down market, it may be a good financial strategy to delay retirement.
Many baby boomers will turn 62 in the next couple years. In fact, during the next 20 years, over 70 million boomers will retire. Many will do so without enough savings set aside to provide the income they will need throughout their retirement years.
Some folks have physical limitations or health issues that force a move to retirement and to collect social security. But if you are a boomer and your health permits it, I recommend that you at least consider delaying your retirement – it can make a significant impact on you financial future.
- First, waiting longer to retire will increase your social security check. With SS, you can get a lower monthly check for a longer period (by retiring early) or a higher monthly check (by retiring later). You can start the clock once you turn 62 or you can wait as long as 70. Which way would allow you to collect the most cash? Well, that depends entirely on when you die, and none of us know that. The payments are set actuarially so that folks who live to the average age will collect the same dollar amount either way. However, one of every four 65 year olds alive today will live past the age of 90; one of ten will live past the age of 95. If you want a quick assessment of how long you might live, check out the web site, www.livingto100.com, which estimates life expectancy. Receiving a larger SS check later in your retirement might be a good idea, especially if some of your other assets might be declining.
- Second, waiting longer to retire can significantly improve finances for the surviving spouse. Nearly six out of ten folks on SS are women; seven out of ten of those over 85 are women. In addition, Social Security checks make up a greater percentage of total income for women. When the main wage earner (usually the man) dies, the widow can claim 100 percent of her husband’s benefit. However, if the husband enrolled in SS early, she is left to struggle with the lower benefit for her remaining years.
- Third, waiting longer to retire gives your other retirement assets time to grow too. First, if you continue to work there is no need to take distributions from your IRA, 401K, etc. Second, over time those assets continue to grow even if you make no contributions. If you are able to continue contributions, you can improve your next egg considerably.
Waiting just three or four years can mean an extra 20% – 25% in Social Security and in other retirement assets as well. If you keep working, reward yourself – take some of the cash and go on a great vacation and do some other things you’ve wanted to do. Stay active and in good health. Enjoy life and give back. You can relax knowing that you’ve done a good job of planning for the future.
Published in: Personal Finance