Should You Be Waiting Longer to Retire?
One in five Americans 65 or over is still working – the highest percentage since the late 1960s, according to the Associated Press. Add to that the fact that the Boston Globe recently reported more people are putting off retirement until their late 60s or even sometime in their 70s!
As we travel deeper into another year, you may be excited that you’re a bit closer to retirement. You’ve targeted a walk-off-into-the-sunset date, and like most people, you can’t wait. But perhaps you should.
Why? To increase savings and invest longer; to ultimately receive bigger Social Security checks; or perhaps mainly to stay busy and more engaged intellectually and socially. The financial factors alone make it a fairly easy decision to stay employed as long as possible.
Retirement is still something most people look forward to, but over the years some of the reasons for anticipation have dwindled. Pensions are far less common, giving way to employee-contribution retirement vehicles like 401(k)s. Workers today understand they may have to provide for a substantially greater share of their retirement income, and longer average lifespans make that even more difficult. Retirement planning is far different than planning for your child’s college education. Parents have the advantage of knowing when the student will enroll in college and generally how long he or she will be there. The “when,” “how long,” and “how much” are unknown factors when it comes to retirement.
Another reason many are moving back their retirement age: lack of savings. Retirement requires much more of a nest egg than it did 50 years ago. A US News survey showed the two top reasons people keep working into their late 60s or 70s is to “grow their nest egg and earn more money for fun” in retirement.
Having enough for basic living expenses, medical costs, etc., is a concern that’s often not alleviated by Social Security. It’s punitive to receive your benefits at the earliest allowed time – age 62, or before full retirement age. Taking Social Security early could mean as much as 30% less in monthly benefits compared to waiting until your full retirement age. That threshold for many now is age 66 to 67, and many financial professionals recommend waiting until 70 years of age when the benefits are at their maximum.
Another key factor to remember about Social Security and how it relates to continuing full-time employment: there’s no penalty for working while taking benefits after your full retirement age. But there is a penalty if you take Social Security early and still work.
For 2019, the limit on earned income is $17,640 ($1,470 per month). The amount goes up each year. If you are collecting Social Security retirement benefits before full retirement age, your benefits are reduced by $1 for every $2 you earn over the limit.
Another advantage to remaining in the workforce is that the new tax laws ensure lower taxes on annual income, which makes working into the senior years more desirable for many. And not to be discounted are the company benefits one can keep enjoying while extending their work life. Many seniors continue to work because their employer’s health insurance is better and less expensive than Medicare.
Although markets are beginning to experience a rise in interest rates, they are still at historic lows, which makes it more difficult for today’s retirees, or those looking at retiring soon, to generate guaranteed sources of income – further delaying retirement in some cases.
One must also look at where we are in the current economic/market cycle. Since we may be in the later innings of this cycle, those planning for retirement must re-evaluate their financial goals and savings potential. How do you envision your future lifestyle? There are many options available to improve your retirement savings and protect you against the recessionary and bear market cycle which might be ahead.
CONTACT US: There are more reasons than ever to keep working longer than people once did. Employing a strategic investment strategy created just for you by a Certified Financial Planner can also benefit you in the long run, making you more financially secure and ready to enjoy retirement. Feel free to contact me, Michael J. Bytnar, CFP, RICP, directly at 734-637-4688, with any questions regarding the benefits of retirement income planning or estate planning. I will put my 19 years of experience in financial services and the insurance industry to work for you.
TFG Financial Advisors, LLC is a registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities, and past performance is not indicative of future results. Investments involve risk and are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here.
