Longevity and the Retiree
According to The Centers for Disease Control and Prevention, almost 75,000 Americans are centenarians, that is, they are more than 100 years old, and this aging demographic is having a dramatic impact on the labor pattern in the U.S. Rather than retiring at the traditional age of 65, more than 30 percent of adults in the 65 to 69 age bracket are still employed, as are 20 percent of those in the 70 to 74 age bracket.
The drawback of increased longevity is the chance of outliving one’s finances. To offset this drain on their financial security, many seniors now continue their employment long past the age that their ancestors retired. Planning for retirement has a different meaning now than it has in the past due to the increased life expectancy of the baby boomer generation.
Impact on Social Security
When planning for their golden years, most retirees included their monthly Social Security as a substantial part of their income. However, with increased longevity, this may be insufficient. Those who retire early receive a lower monthly payment from their Social Security, so the longer an individual can delay retiring, the higher their monthly payment should be.
Retiring at age 62, which may be necessitated due to circumstances, will result in a significantly lower monthly income than would be received at age 65. Those who can delay retiring until at least age 70 will receive close to 60 percent more in their monthly Social Security payment. Although Social Security was intended as a hedge against poverty for the elderly, it doesn’t keep pace with inflation, so other avenues of income are usually necessary.
There is no age limit on contributions to Social Security, so working longer can provide additional security for those who intend to retire in the next decade or thereabouts.
The Social Security Administration will deduct $1 for every $2 in earnings after the earnings limit is met each year for those who are under full retirement age. Those who are above that age will have $1 deducted for every $3 earned. The limits are different for each category, and both change annually.
Continuing to work until at least age 65 or 70 will provide the individual with a larger and more stable income after he or she retires. Since there is no upper age limit on contributions to Social Security, as long as an individual is employed, he or she will contribute to their Social Security account. The extra income can provide for necessities or luxuries that might make the retired life more comfortable.
Many employers will match funds contributed to a 401(k) or other retirement savings plan, so this is essentially free money. Empty-nesters can increase their rate of savings if they no longer have tuition bills to pay, which is another source of essentially free money for those whose employers have a savings-matching plan.
Savings from Health Insurance
Health insurance is expensive. Individuals under the age of 65 are not usually eligible for Medicare and those over 65 must pay extra for Medicare Part B and/or for supplemental Medicare insurance. Most employers provide health care, so by continuing to work after age 65, individuals will not have to spend substantial amounts of money on health insurance premiums, which can yield a substantial contribution to their savings and investments.
Physical and Mental Health Benefits
Not only will working longer increase the size of an individual’s nest egg, but it provides physical and mental benefits as well. Studies have proven that those who defer their retirement are generally happier and healthier than those who retire earlier. Satisfactory employment provides mental stimulation and social interaction, which can sometimes be missing from a retiree’s life.
Overall, working past the traditional retirement age can have many positive benefits for those who are healthy enough to continue their employment. Even a few years of extra employment can elevate a marginal or an average nest egg into a more secure financial future for the retiree.
Always Be Outstanding and let’s make yesterday jealous of today!
Vincent A. Virga
President ~ PFS Wealth Management Group
Advisory services offered through Madison Avenue Securities LLC (MAS), a Registered Investment Advisor; MAS and PFS Wealth Management Group are not affiliated companies. MAS does not provide legal and tax advice. Seek competent legal and tax counsel for your specific needs. Our firm is not affiliated with, or endorsed by any government agency.