willthrill81 wrote:

And this.

"By working five more years, a husband and wife who are both 55 today, earning a combined $120,000 a year with retirement savings of $75,000, would end up with 47 percent more a year to live on at age 70. That’s assuming they continue to save 10 percent of their income each year, and withdraw 4 percent of savings each year in retirement."

If such a couple doesn't even have one year's income saved by age 65, working five more years isn't going to solve that problem. 47% more than $75 is good, but a long, long way from being enough. Such a couple should likely be saving 50% of their income during this five year period and finding ways to dramatically cut their retirement expenses.

We agree that a couple making $120K a year at age 55, with only $75K saved makes you scratch your head wondering what they have been doing all these years!!!

Regardless...

The author was factoring in working 15 more years from age 55, saving $12K per year, not taking SS at age 65 (or FRA of 67), but working until 70 and taking SS at 70. Working until 70, and delaying the start of SS for a higher payment, the couple would start their drawdown later which would result in fewer years needed to provide income from their retirement savings.

Current principal: $75,000

Annual Addition: $12,000

Years to Grow: 15

Annual Return: 7%

Future Value after 15 Years: $529,584

Add the increased SS payments by delaying to 70.

First year 4% drawdown would be about $21K. SS would probably be about $57-60K+ for this couple.

The author is simply pointing out the improvement of the above scenario over punching the time card for the last time at age 65, and taking SS at age 65.

Change the Years to Grow to 10 (And change the SS payments to begin at 65)

Current principal: $75,000

Annual Addition: $12,000

Years to Grow: 10

Annual Return: 7%

Future Value after 10 Years: $324,939

SS payments at age 65 would be $6696 per year less for this Boomer couple than if they waited until their assigned FRA of 67. The difference would be even more, (though the author didn't give the figure, but we know that each year they wait means 8% more SS income), compared to waiting until age 70.

NY Times article said...

*For a ***baby boomer born in 1962**, “full retirement age,” according to the Social Security Administration,** is 67**. Your benefits increase 8 percent a year, every year, until age 70, if you defer. (There is no increased benefit for waiting beyond that.)

All these factors make a huge difference, as I was always quick to point out.

By working five more years, a husband and wife who are both 55 today, earning a combined $120,000 a year with retirement savings of $75,000, would end up with 47 percent more a year to live on at age 70. That’s assuming they continue to save 10 percent of their income each year, and withdraw 4 percent of savings each year in retirement.

**A huge part of that 47 percent increase comes from higher Social Security benefits.** If our hypothetical couple apply for Social Security at age 65, they are in essence penalized for not waiting two years. They would each receive $3,348 less a year.

So, **I wrote it was just a no-brainer to work until age 70**, if you can.
Our take away, based on data we have all seen about how much - or rather, how little money - people have saved for retirement in the age group mentioned above, it might make the above scenario of working until 70 a necessity for many if at all possible in their jobs. However, in the case of a fictional couple bringing in $120K at age 55, there are plenty of options for them to jumpstart their savings and play some quality catch up with their savings ASAP.

The author points out ...

*While my math was right, what I now realize is just how hard it is to keep working as you age. My job doesn’t require much more than typing all day long, and I find myself getting fairly tired by day’s end. I can’t imagine I am going to have more energy a decade from now.*
Plenty of aches and pains in my body at age 55 when I haul it out of bed every morning.