Retirement By the Numbers

July 16, 2014 § Leave a comment

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I find it helpful to speak to folks with experience when making decisions about my future, and I’m guessing you do, too.

So when we are considering retirement strategies, what decisions, say on taking Social Security, have others tried? Have they been happy with the results of those decisions or would have, in hindsight, done things differently?

I found a few interesting studies that asked some of those very questions and her are the findings.

How much do we need? This is one of the first questions to ask as you begin retirement timing. About 85% of what you are bringing in as a working person is the amount many experts say is what you’d do well with in retirement. Fidelity Investments has estimated, living until perhaps age 92, we should try to save 6 times our ending annual salary. So if you are earning $50,000 in your final working years, using this example, you might want to have saved $300,000.

The sobering fact is that according to a survey by Employee Benefit Research about 36% of folks have saved LESS than $10,000.

What about Social Security? According to a study by Nationwide Financial 38% of retirees regret having claimed their Social Security benefits early. An article in Investments News reports that retirees can claim Social Security benefits as early as 62, but their benefits are permanently reduced by 25% compared to waiting until full retirement age of 66 to begin payments. And those willing to wait even longer earn delayed retirement credits worth 8% per year for every years they postpone benefits up to age 70, increasing their benefits by an additional 32%. And that, my friends, is real money.

The moral of the story is that if you can afford to wait, if you can keep working, live more frugally, whatever it takes to stave off taking of benefits, might be best for your future.

So, at what age should you retire? Think this through with me. The longer you wait the better for your wallet. Delaying retirement by even just a few years can increase your annual Social Security benefit, may allow your savings to grow for a few additional years, may allow you to really pay off troublesome debt.

On the other hand, healthcare costs are a concern if you retire before age 65, before you are eligible for Medicare.

What’s the answer? There is no single answer, no cookie cutter, which addresses each person’s individual concerns. General rules of thumb: save as much as you can. Pay off debt. Wait to retire so you can maximize benefits. (CR10139)

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