7/2/2012 12:42 PM ET|
Why 68 has become the new 65
In these challenging times, baby boomers are delaying retirement and staying in the workforce longer.
For many baby boomers who are closing in on retirement without enough money in the till, working longer is the only lever they can pull.
"68 is definitely the new 65," says Stacy Francis, a certified financial planner in New York City. "Delaying retirement leaves a worker with fewer years of retirement to finance, more time to save and earn returns, and higher Social Security benefits if they delay taking them."
A survey by human resources consulting company Towers Watson earlier this year found that 39% of workers plan to delay retirement -- and the majority of those delaying retirement expect to work an additional three years. The findings mirror the advice of the financial experts in a CNBC recent roundtable discussion on "The New Retirement."
"If you can keep your job, yes, work longer," advises Frank Troise, a senior portfolio manager at SoHo Asset Management in San Diego.
He says boomers face a "financial trifecta" -- income, expenses and investment returns -- and if you lose one, the two others have to be modified.
"The boomer today who is 55 or older, they're not receiving any income appreciation," Troise says. "They're at serious risks of not keeping their jobs. Since income is not a variable they can control, if they're also now reassessing their market returns, the only other variable they can control is their expenses."
"Not only does working longer mean more contributions and more compounding, but the longer you can defer drawing assets from your portfolio, the more you improve its longevity," says Christine Benz, the director of personal finance at Morningstar.
"It's also likely that bond and cash yields will be more hospitable in the years ahead than they are right now," she adds. "And delaying Social Security benefits is also valuable."
If you're 55 or older, you won't reach the full retirement age for Social Security benefits until age 66½ or 67.
So retiring at 68 or even 70 may not end up being much of a stretch.
Delaying retirement beyond your full retirement age -- until you're required to take distributions at age 70 -- can increase your Social Security benefits by 8% a year. The benefits are largely tax-exempt.
By retiring at age 70, you'd receive nearly double the annual Social Security you would have received if you took early retirement at age 62. Check out the calculations on the Social Security Department's website here.
The key is to be as disciplined as possible in your retirement savings strategy, especially in your 50s, financial experts say.
Those 50 or older can contribute extra "catch-up" contributions to IRAs, 401k's and other defined-contribution plans.
For 2012, the maximum contribution for a Roth or traditional IRA is $5,000 -- but those 50 or older can contribute $6,000.
For 401k's, the contribution limit is $17,000 or $22,500 if you're 50 or older.
But once you're in your 60s, those catch-up contributions may not be as beneficial, according to some studies. If you've been disciplined in your savings, you may be able to relax and try out a little "practice retirement" while you continue working.
An analysis by T. Rowe Price found that because your retirement time horizon is pretty short once you hit your early 60s, you're not benefiting from tax-deferred compounding that much. So why not continue working beyond 65, but stop making 401k contributions and spend that money instead?
"The reality is, if you're going to have to keep working, it's a way to kind of split the difference," Benz says. "That way you can enjoy some of the things you're hoping to enjoy during retirement -- taking your grandchildren to Disney, for example -- while you're still earning a paycheck."
While working longer or working part-time is increasingly becoming a cornerstone of many boomers' retirement plans, "it's risky to count on being able to do so," says Benz. "Poor health or job loss could get in the way."
So protect yourself. Build a cash reserve for a job loss or a catastrophic health event as part of your retirement plan.
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I also agree completely. I am now an ole duffer (63), started working full time (40 hrs/week or more) at age 13 (so 50 years +/-), have lived well within my means all the while, am now unemployed and seeking gainful meaningful employment (good luck to me on that!!), have seen my retirement savings dwindle, home value dwindle, cost of living increase, seen the retirement age increase over my working lifetime, seen the disparity between the have and have not become increasingly wider over this same time frame, have watched the United States shed its solid manufacturing base to overseas cheap labor in favor of corporate profits, seen the integrity of our elected officials slide into the gutter and a number of other things which gives me a very interesting perspective on where we are, why we're here and how we got here. Not a very pretty picture. If the people of this country don't get back to some core values and enforce these same values on the government that is SUPPOSED to be working in the best interests of the majority of We The People I honestly think that this country will continue to slide into economic and moral decay that will become irreversible and we will (as we are already on the way to becoming) a third rate power with all that comes with it.
The hell with that!
Screw it - AT 62 I am done (was laid off at 55 -3 years ago and severely underemployed) and deal with what I can get as soon as I can get it.
God aint gonna guarantee I get to 62 let alone 65-68 so grab for the ring as soon as your time comes.
so ....we have to work 95% of our lives to only hope we can retire for ,what 8-10 years before we die....
if the goverment had done their job....we would not have to keep our jobs untill we are 75....
We gave too much power and they abused it....took our money....sold our reirement..sold our jobs....
and we are no better off...than we were... before we came to this country....
POWER CURRUPTS....ABSOLUTE POWER... CURRUPTS ABSOLUTLY....
Sorry...forgot to include the SOB's in the banking industry.
I retired a year ago, & a company that I had worked for before contacted me asking me to do some contract work for them. All I can say is where was this job 15 or 20 yrs. ago.
I spent 45 yrs. in this business, ( oil ) & it is just amazing that people complain about there is no work out there. That is crazy! The only reason this company brought me back to do contract work for them is because there is not a second generation of oilfield works coming up. I look around, & the vast majority of the people I work with are my age or older.
My personnel opinion is people are not hungry enough. As long as Uncle Sam is there to make sure they don't get hungry, why should I go out & get a job. Just my opinion.
Same worthless story, different week. A lot of us won't ever see a dime of OUR Social Security since it has been stolen by the Washington Crooks. The avarage persons 'Nest egg" has been spent, their homes are worth less or are worthless and even if this economy actually turns around and gets healthy again, it will take years to get back to where we were years ago. Who can save for retirement ? Politicians, that's who.
They say around 2035 Social Security payout will be down to 75 cents on the dollar. No doubt it will be much worse than that and much sooner than that because we all know Congress can't do one friggin thing. Thanks Washington, for stealing my money and letting me work till i take my last breath.
P.S., the guy in the picture in this article is smiling. He should be crying. must be a Politcian or a Wall street Casino owner.
65 is the new 68, what a disgrace of a country. keeping their seniors working longer. while the small minority give them selves bonuses. I am ashame to call myself an American!!!!
Americans, please pull your heads out of your behinds. We are all screwed. We are being lied to, stolen from and enslaved.
Yeah, let's count on our 401k's ....whatever wall street.
I am 65 1/2 and most people I know have been forced to draw Social Security at age 62. In the last two decades between the millions of illegal aliens taking jobs and the outsourcing of jobs for those over 55 Uncle Sam has saved a bundle forcing early Social Security draws.
The only ones with great retirement benefits and job security are those in government positions and those protected by political motivators..
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