Delaying Retirement, But Not Your Retirement Dreams

by Christine S. Fahlund

Delaying Retirement, But Not Your Retirement Dreams Splash image

Many investors today who had planned to retire early at 62 when they became eligible for Social Security benefits—albeit at a reduced rate compared with retiring at full retirement age—are discovering that those benefits, combined with their retirement savings, cannot support the lifestyle they expected or provide the financial cushion in retirement they desire.

Often, they are disappointed to realize they may have to continue working and saving for several more years to catch up. This strategy leaves preretirees in transition with a choice: retire early with insufficient savings and income or delay their retirement dreams until after they retire.

For some preretirees there may be another, more desirable option. An analysis by T. Rowe Price demonstrates that, if those in their early 60s decide to keep working, but discontinue making contributions to their retirement plans—spending that money instead—they can start fulfilling some of their retirement dreams sooner and still be in a stronger financial position down the road.

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Christine S. Fahlund , Ph.D. and CFP, is a senior financial planner and vice president of T. Rowe Price Group, an investment management firm based in Baltimore, Maryland.


Benny from Mississippi posted over 2 years ago:

The only problem with working until 70 is that the expected life span is only 85. 15 years of retirement isn't much and the older you get the less likely your health will allow you to do the things you wanted to do.

David from Illinois posted over 2 years ago:

It also depends on the physical demands of your job. For example, if you are a steel worker your retirement age would be different than if you worked in an office.

Gary from Minnesota posted over 2 years ago:

Great strategy if one is physically able. Warren Buffet is 80 and still going strong. Personally, continuing to add value and the feeling of contributing to society through meaningful work may increase our life expectancy.

Claudia from Oregon posted over 2 years ago:

"Working part time beyond age 62" sounds great until you try to find a part time job that includes health care benefits--even partial benefits. Age 62 to 65 is three scary years.

Ray from South Carolina posted over 2 years ago:

There is far too much emphasis on early retirement by the media ,little of which is of any value .All other things being equal , work until age 67 and keep yourself in good physical shape

Thomas from New Jersey posted over 2 years ago:

My goal is to work to 67 and keep in shape.

Tim from Pennsylvania posted over 2 years ago:

I like this plan. I am 9 years away from 62 and really don't expect to fully retire, but would like to have more freedom to do things that I am unable to do today because of college and other expenses.

Randy from Florida posted over 2 years ago:

Life expectancy needs to be factored in to any discussion of retirement. If people knew how much they are reducing their lifetime by smoking, diabetes, high blood pressure, and obesity, maybe they would change their lifestyles. Of course, another factor is being sedentary, so working at a desk and computer can be hazardous to your health! Changing from a desk jockey job to delivering mail or pizzas or the newspaper would be beneficial to your health.

Nancy from Maryland posted over 2 years ago:

I like the idea, particularly when clients have the emotional roadblock to retirement because their income-producing ability has ceased. If they only spent their discretionary money on doing the things they plan to do in retirement may help them to adjust better to the actual retirement event.

Barbara from New York posted over 2 years ago:

I like the idea of staying mentally stimulated which a job sometimes provides. If we look at research about brains, it is important to stay stimulated by relationships for helping with brain health.

So having a lighter work schedule and being able to do more other activities while not using retirement income and funds makes good solid sense to me. One still gets the stimulation from contact with the workplace.

Erik Johnsson from Pennsylvania posted about 1 year ago:

If the couple stop contributing 15k to their qualified plans, they will have less than 15k extra income. The entire 15k will be taxed at current rates. If they are in the 25% bracket, their net additional spendable income will be less than 12k.

Careful analysis should be completed before making this decision. Factors to consider is the future value of the tax deferral on the 401(k) contribution, and the increased tax bracket that may arise from foregoing the contributions.

Demetrius Andressakis from Illinois posted 8 months ago:

In general I agree with the strategy. One item I disagree with is the amount you need at retirement as a percent of your income. Let's say that the couple in our example makes 100K a year and needs 75% or 75K to maintain the same life style at retirement. Now, let's assume that the same couple makes 200K but they live on 100K and they invest the rest. Again, in the second case the couple will need 75K at retirement. In other words what you need at retirement it shouldn't be a % of your total working income but a % of the income you spend to live on.

Richard Nelson from New Jersey posted 8 months ago:

What is the rational of expecting only 75% or that you spend to live on in retirement?

It would seem that after retirement one would require more more spend as there is now time to time to travel, hobbies, entertainment...

Neal Mogk from Arizona posted 8 months ago:

It seems that too little is said about having your mortgage paid off by the time you retire. That's one of our biggest expenses that we expect to be done with by that time, decreasing the amount we need to live on in retirement. In essence, one is pre-paying your biggest living expense, and it's no longer subject to inflation as opposed to some sort of rental.

Jerry Overman from Virginia posted about 1 month ago:

Retired at 62 with nice pension. Will wait until 70 to take SS primarily to assure wife can step up to higher benefit when I pass along. Currently do volunteer work, and small part time job. Wife still works as she is 5 years younger. Now 65 and struggling with all the issues surrounding Medicare and income addition to medicare payments.

Stephen Tradd from Florida posted about 1 month ago:

The mistake here is that you are following a rule of thumb. Instead of planning that you need 75% of your income calculate your expenses and itemize fixed and discretionary expenses. Many do not live off all their earnings, and there are many expenses that will be less. If you really want to retire early, then maybe you do not travel as much, or travel but be more frugal. If it gets right, slow down on the discretionary spending. But blindly following a rule of thumb (which I have seen ranging from 60-80% of income) doesn't take sense.

Stephen from Florida posted about 1 month ago:

I hate seen in previous posted comments

Daniel Wickenhauser from Illinois posted about 1 month ago:

When I calculate my retirement income against anticipated expenses, SS does not even enter the calculation. I am able to decide on when I start SS based on when I want excess income to my retirement. My thoughts are to get it while I am able to spend it on quality of life, not the extension of life through medical bills and extended care. This is only short sighted if you have not prepared for retirement through your own investments and pensions.

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