If you are 60 or older, you undoubtedly have begun to think about your impending retirement. You may also be already weighing the virtues of calling it a career against the liabilities of retiring too early. More and more experts, it seems, are arguing these days in favor of working longer. The Social Security Administration certainly is.
The longer you work, the more retirement benefit will come to you in your monthly Social Security check. Social Security, along with any retirement benefit you might have accrued from your employer, is the sole guaranteed, constant, unvarying source of revenue upon your retirement. Investments and savings can be arranged so they have a good chance of providing reliable income, but the Social Security benefits you have earned will never change for the rest of your life.
While your investments made over your life may provide robust income for you as long as you have them, no matter what happens to them Social Security will always provide the amount promised you upon your retirement.
Your first retirement decision is when to stop working and begin relying on Social Security, retirement and your lifetime of savings and investments to make you comfortable without a paycheck. This is a critical decision and must be preceded by thorough research and discussions with your spouse or anyone who will share your prosperity — or lack of it — for as long as you live.
As far as the Social Security Administration is concerned, full retirement age is the age at which a person may first become entitled to full or unreduced retirement benefits. If you were born between 1943 and 1954, your age of retirement with full benefits is 66. If you were born in 1960 or later, full retirement can be claimed at 67. If your full retirement age is 67, you are allowed to collect benefits at age 62, but your monthly amount will be reduced by about 30 percent. If you wait until 63, the reduction is about 25 percent; 64, about 20 percent; 65, 13.3 percent; and 66, about 6.7 percent.
So Social Security encourages people to work later and begin collecting benefits later. The good news is that people are living longer. Whereas in 1960 the life expectancy in the United States was about 70, in 2016 it was just under 79, although it dropped slightly in 2015 for the first time since 1993. Nevertheless, if people take care of themselves in terms of diet, exercise and generally healthful habits, they can greatly improve their chances for a 30-year retirement or longer. If health is not an issue, working longer will usually prove wiser. It has been estimated that a typical 60-year-old couple would nearly double their retirement income by working until 70 instead of 62.
While the amount of expected income and resources is important, so is what you want to do with them. Do you envision a retirement featuring travel, a new home, a lakeside cottage, lots of leisure? Or part-time work? Will you be tapping retirement accounts or adding to them? Experts recommend not withdrawing more than 4 percent — or, for some, even 3 — from 401(k) accounts to avoid draining them in 30 years.
Here are some other issues to consider as you approach retirement:
- Make sure your health care will be adequate and affordable. Medicare provides for most medical expenses but not all. Having a backup private health-care policy is imperative. Twenty-five years ago, two-thirds of large companies offered retiree health benefits; that has now fallen to one-third, according to Allianz Life Insurance. Fidelity Investments estimates that couples retiring at 65 will spend $240,000 for health care after retirement.
- Is your house ready to accommodate retirees? In not, you may want to overhaul it for the years when you are less mobile. Walk-in showers, non-slip surfaces, storage space that’s within easy reach, railings and strategic grab bars are recommended so that you’ll be able to stay in your home longer and avoid the median cost of $3,600 a month for an assisted-living facility.
- Do you have plans to stay busy? If not working for revenue, consider volunteer options that are useful and, especially, that satisfy your interests. Those eight hours a day that were spent at work need to be filled, and not by endlessly sitting and watching TV.
- Are you used to keeping track of your money? Have enough cash on hand to replace the broken garbage disposal or repair the balky car?
- Do all of your accounts have designated beneficiaries? The last thing you want is for family members to be tied up in probate court after you’re gone.
By the time you’re ready to sign the retirement and Social Security papers, you should have saved enough money in various types of accounts to provide for a long and prosperous retirement. If you haven’t, then you aren’t ready to sign the papers just yet. But, when you are, pay as close attention to your financial well-being as to your physical well-being. You still have investment options if called for, and you still have work options if they fit your needs and abilities. You’ve worked a long time to get where you are. Continue to make the most of your opportunities and talents.
To that end, ALEC Investment Advisors can help ensure you're on the most advantageous route to retirement.
Securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor. CBSI is under contract with the financial institution to make securities available to members. Not NCUA/NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not a deposit of any financial institution. FR-1859285.1-0717-0819