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.

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
Pittsfield Sees 2nd Ashuwillticook Rail Trail Extension
Holiday Hours: Veterans Day
Berkshire Ajax Soccer Club Sets Tryouts
Q&A: Third Berkshires' Leigh Davis Talks Path Forward
Weekend Outlook: Shaker Village Day, Eagles Concert
Candlelight Tour at the Bidwell House Museum
Berkshire Organizations Awarded Stories Grants
Clark Art Lecture on Images of the Female Body in 20th Century Argentina
BArT Announces First Quarter Honor Roll
Williamstown Finance Sees Pressure on Property Tax Bills
 
 


Categories:
@theMarket (507)
Independent Investor (452)
Retired Investor (215)
Archives:
November 2024 (2)
November 2023 (3)
October 2024 (9)
September 2024 (7)
August 2024 (9)
July 2024 (8)
June 2024 (7)
May 2024 (10)
April 2024 (6)
March 2024 (7)
February 2024 (8)
January 2024 (8)
December 2023 (9)
Tags:
Crisis Energy Rally Stimulus Interest Rates Federal Reserve Economy Recession Banks Unemployment Commodities Debt Stock Market Europe Oil Currency Congress Retirement Markets Stocks Pullback Selloff Deficit Japan Metals Qeii Jobs Greece Bailout President Debt Ceiling Euro Election Taxes Fiscal Cliff
Popular Entries:
The Independent Investor: Don't Fight the Fed
Independent Investor: Europe's Banking Crisis
@theMarket: Let the Good Times Roll
The Independent Investor: Japan — The Sun Is Beginning to Rise
Independent Investor: Enough Already!
@theMarket: Let Silver Be A Lesson
Independent Investor: What To Expect After a Waterfall Decline
@theMarket: One Down, One to Go
@theMarket: 707 Days
The Independent Investor: And Now For That Deficit
Recent Entries:
The Retired Investor: The Trump Trades
@theMarket: Will Election Fears Trigger More Downside
The Retired Investor: Betting on Elections Comes of Age
@theMarket: Election Unknowns Keep Markets on Edge
The Retired Investor: Natural Diamonds Take Back Seat to Lab-Grown Stones
@theMarket: As Election Approaches, Markets' Volatility Should Increase
The Retired Investor: Politics and Crypto, the New Bedfellows
@theMarket: Stocks Make Record Highs Despite a Wall of Worry
The Retired Investor: Back to the Future in Nuclear Energy
@theMarket: A Week to Remember