Home About Archives RSS Feed

The Independent Investor: Retire Later Rather Than Earlier

Bill Schmick

Over the last year, a number of baby boomers I know have explored the option of early retirement. Between the financial crises, the recession and the volatility of the stock markets, burnout has hit the over-60 crowd. They yearn for a less stressful life and believe that early retirement is the answer. My advice is don't do it.

The first factor to consider is whether you can afford to retire. The last two years have put a large dent in most tax-deferred savings plans. Some of that damage has been repaired, but by no means all, with most savers still down 20-25 percent from the peak value of their portfolios. All indications are that it will take several more years before the value of our investible assets fully recover.

"I still have my Social Security to fall back on," argued a 62-year-old engineer from a large Berkshire company, headquartered in the center of the county.

"Yes," I said, "but if you wait another eight years, you could pull in a heck of a lot more."

It is true that retired workers can begin collecting Social Security benefits at 62. But your benefits are reduced by as much as 30 percent if you do. Those born between 1943 and 1954 receive full benefits at age 66. The full retirement age increases gradually after that and for those born after 1960 the retirement age is now 67.

Take me for example: I'm 61, born in 1948, and plan to retire sometime after 70. Why?

Well, I could tell you I love my job, (which is true) and that I also love to write. Beyond that, it does not make any economic sense for me to retire before that. For every year I postpone retirement my Social Security benefits increase by 8 percent. A 32 percent increase in benefits over four years is not pocket change.

I also plan to continue working after I start claiming my benefits. Let's say Joe planned to retire next year, at 62. He can earn up to $14,160 without paying a penalty. Any more than that, however, and Social Security deducts 50 cents on every dollar from his benefits. If Joe waits until his retirement age of 66, his earnings limit climbs to $37,680 and the penalty for earning over that is reduced to 33 cents on the dollar. If Joe were to wait just one year longer, there would be no limit or penalty at all.

Since Social Security benefits are calculated based on your 35 highest years of earnings, and many of us are in our highest earnings years right now. It pays us to continue to earn more and bump up our earnings as much as we can.

There are also advantages if you are married. Spouses are entitled to Social Security payments of up to 50 percent of the higher earner's check provided they wait until full retirement age. Since it's still a man's world, I have made more than my wife throughout our working careers. Since we both work, we can claim spousal payments and individual payments and do so at different times.

My wife Barbara is 10 years younger than me. So let's says I retire at 70 percent. She can then claim a spousal payment of 50 percent at that time and then switch to payments based on her own work record a decade later. Those payments will be much higher because she chose to delay her own retirement until she was 70.

Today's boomers are in better shape, have less physically demanding jobs and higher salaries than any preceding generation before them. By working longer, we oldsters increase the productivity of the American economy, provide the workplace with leadership and creativity and reduce the burden of Social Security deficits and the high cost of Medicare on younger generations. Putting off retirement as long as you can makes a great deal of sense both individually and for the country overall. Who knows, you may live longer as well.

0 Comments
Tags: retirement      

Support Local News

We show up at hurricanes, budget meetings, high school games, accidents, fires and community events. We show up at celebrations and tragedies and everything in between. We show up so our readers can learn about pivotal events that affect their communities and their lives.

How important is local news to you? You can support independent, unbiased journalism and help iBerkshires grow for as a little as the cost of a cup of coffee a week.

News Headlines
Williamstown Holiday Walk, Reindog Parade Returns for 2021
Fire Cider Featured in Amazon Holiday Gift Guide
Memorial Hockey Game Honors Memory of Marc Parrott
North Adams Housing Authority Delays RAD Conversation to Spring
Adams Animal Rescue to Host Fundraiser for 'Roxy'
North Adams Hosts Menorah Lighting on Sunday
MDAR Commissioner Marks 'Green Friday' at Seekonk Tree Farm
Small Business Saturday in the Berkshires
Brian Horan Joins Cain Hibbard's Litigation Group
Winter Weather Advisory for Northern Berkshire; Snow on the Way
 
 


Categories:
@theMarket (390)
Independent Investor (451)
Retired Investor (68)
Archives:
November 2021 (7)
October 2021 (8)
September 2021 (9)
August 2021 (6)
July 2021 (8)
June 2021 (6)
May 2021 (6)
April 2021 (9)
March 2021 (8)
February 2021 (8)
January 2021 (5)
December 2020 (6)
Tags:
Debt Ceiling Taxes Housing Euro Japan Currency Banks Federal Reserve Retirement Pullback Recession Debt Commodities Stocks Crisis Deficit Europe Fiscal Cliff Energy Wall Street Rally Metals Bailout Stimulus Oil Economy Markets Europe Election Jobs Selloff Stock Market Congress Interest Rates Greece
Popular Entries:
The Independent Investor: Don't Fight the Fed
Independent Investor: Europe's Banking Crisis
@theMarket: A Week to Forget
The Retired Investor: The Teacher Shortage
@theMarket: The Bottom Is In
@theMarket: One Down, One to Go
@theMarket: Corrections Are Good for the Soul
@theMarket: 707 Days
@theMarket: Let the Good Times Roll
@theMarket: This Is the Year for Commodities
Recent Entries:
The Retired Investor: Thanksgiving Post-Pandemic
@theMarket: Market's Week of Indecision
The Retired Investor: The Teacher Shortage
@theMarket: Annual Inflation Hits 30-year Highs
The Retired Investor: SALT Away?
The Retired Investor: Vicious Cycle Between Energy & Food Prices
@theMarket: Markets Get a Green Light
@theMarket: Good Earnings Support Markets
The Retired Investor: The Billionaire Tax That Wasn't
@theMarket: Stocks Are Signaling an All-Clear