Working Until 70 Could Ease Retirement Finances
Knowing when to take Social Security benefits can be difficult — particularly if you're unsure if you'll live well into your 80s or 90s. There can be a break-even point for taking benefits earlier, but that can depend on many factors, including whether you're married.
A simple example: Take a single person claiming at 62 vs. an identical one at the full retirement age of 66. Here, the age at which the two hypothetical individuals had received about identical Social Security benefits is 81. So in that example, if you claimed at 66, you'd need to live into your 80s to receive more money in the long run.
Understanding Social Security
If you live to the average life expectancy, experts note, the system is designed so you'd receive the same amount in lifetime benefits no matter which age you choose.
The Transamerica Center for Retirement Studies indicated that only 14% of workers have a great deal of understanding of Social Security benefits.
Yet, that study indicated about 21 million American workers — 54% of them women — are expecting to rely on Social Security as their primary source of income in retirement. Overall, that's more than 27% of the total American worker population expecting Social Security to be their main income in retirement.
If someone has savings and works a few more years, their 401(k) investments have a longer time to build, too.
And, of course, you have less time to live if you retire later in life, so you've shortened the time you'd need to support yourself, Munnell said.
Retiring and taking Social Security benefits even at 66 instead of 62, she said, can be better for many people. (If born in 1960 or after, Social Security's "normal retirement age" is 67.)
"One of the best things that people have on the asset side of the ledger is a job," she said.
Tips and tools
For every year a person delays receiving Social Security up to age 70, he or she gets up to an additional 7% to 8% per year (for those born in 1943 or later). The extra amount varies, but it can add up.
AARP has a Social Security Benefits Calculator on its website: www.aarp.org/work/social-security/social-security-benefits-calculator. You click on "personalize this guide" to get started.
The June National Retirement Risk Index shows that younger households tend to be less prepared for retirement. Why? They're expected to live longer; Social Security replacement rates tend to be slightly lower for younger households because they face a higher full retirement age, and fewer younger households are covered by defined-benefit pension plans.
The report stated that younger households do not appear to be saving more in their 401(k) plans relative to their income than older households are.
The Center for Financial Literacy at Boston College offers thoughts on curious behaviors that can ruin your retirement: crr.bc.edu/special-projects/interactive-tools/curious-behaviors-that-can-ruin-your-retirement.
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