Choosing a Retirement Age: Later Is Better
Read Time / 3 Minutes
Theme / Retirement
Since people are living longer, more wisdom is needed in choosing a retirement age than in the past. In 1935, when the average life expectancy was 62 years old, the Social Security Act established a program to pay retired workers aged 65 or older a continuing income after retirement. In 1956, when the average life expectancy was 70 years old, Congress amended the Social Security Act to lower the minimum age for retirement benefits to 62 for women, and then amended it again in 1961 lowering it to the same for men.
Today, however, the longevity story has changed. For people who reach age 65, the average life expectancy is another 19.4 years, or 84.4 years old. Even though we are living longer, 60% of us retire by age 65, resulting in two decades yet to live on average. There are situations where we are forced to retire: we have health issues, we need to serve as caregivers for a loved one, we become responsible for raising our grandchildren, or we are terminated from our jobs. However, for many of us, we have the option to choose when to retire, and choosing to retire later has its benefits.
By continuing to earn a paycheck…
· We protect our retirement assets because we don’t have to tap into them.
· We increase our retirement savings through on-going contributions to our retirement plans.
· We minimize longevity and inflation risks because our length of retirement will shorten. Longevity risk is the possibility of living much longer than we anticipate. Inflation risk is the possibility that our retirement spending will increase due to significant price increases.
· We delay collecting Social Security, which increases our eventual Social Security monthly benefit. By delaying from 62 years old (the minimum age to collect) to 70 years old (the maximum age), we increase our monthly benefits by 76 percent.
· We may increase our Social Security benefits since they are calculated based on the thirty-five highest years of earnings, which working longer may help.
There are many other things to consider in a retirement decision (excessive debt, access to health insurance, whether we like our job, how we will spend our days in retirement, etc.). It is important to make a wise, informed decision. As Christian financial advisors, we can help you weigh your retirement options and make the wisest choice for your situation while asking the Lord for His guidance: “But if any of you lacks wisdom, let him ask of God, who gives to all generously and without reproach, and it will be given to him” (James 1:5).
Doug Hanson, MBA
Wealth Advisor
208.697.3699
doug@christianwm.com
