While many older Americans look forward to their retirement years with great anticipation, a substantial subset of the aging population is struggling to prepare for retirement and is deeply concerned about the financial realities of this later stage of life, according to a new study conducted by The Associated Press-NORC Center for Public Affairs Research.
I have been trying for a long time to find a detailed explanation of how Social Security benefits are calculated. There are benefits calculators that don't let you in on the details, just give you a result, but I wanted to know some specifics about what affect various actions, like continuing to work for a while past age 66, would have on the benefit. I finally found this article that explains a lot. Be forewarned, this is very complex and very dense information!
Working past 60? Be prepared to get shortchanged on your Social Security benefit. You’ll be pouring in thousands of dollars in contributions and getting only a few extra dollars a month. This is an old problem, but now it’s easy to see exactly how it affects you and what a change in your earnings history would do to your benefit.
Before collecting that final paycheck, new retirees need to make important decisions. And it’s not just money. There’s also the issue of how people are going to fill their time in a rewarding way.
Even now, financial planners are urging people to work to 70, so they end up with more spending money than if they retire at the full retirement age of 66, or even earlier at 62. At 62, people can get small Social Security benefits, but each year they wait increases their monthly check about 8 percent. According to Munnell's research, retiring at 62, rather than 70, cuts the monthly benefit almost in half. A person who would receive a monthly Social Security check of $1,000 upon retiring at 70 would get $568 at 62. That's been a huge selling point for waiting to retire.
Retirees get ‘full benefits’ at 66, but Alicia Munnell argues that more people should rethink their retirement timing. Most people don’t understand how much claiming early reduces monthly benefits. As the example in the table above shows, claiming at 62 instead of 70 cuts the monthly benefit almost in half, from $1,000 to $568.
A growing number of online tools can help you figure out an optimal 'claiming strategy.' Would-be retirees are turning to a growing number of online programs to answer that question and squeeze the maximum from their Social Security benefits. For couples, the claiming decision can be especially complicated because of the availability of spousal benefits and the need to consider the financial security of the survivor.
Why would anyone want to work after retirement? Isn't celebrating your exit from the workforce the whole point of retirement? A large percentage of nearly retired U.S. households aren't financially ready for retirement and will have to drastically reduce their living expenses. Some of us also enjoy the social interactions we get at work and have difficulty dealing with extra free time. Instead of jumping into retirement full time, it makes a lot of sense to work part time instead. Here are some of the many benefits of working a little bit in retirement:
Each week, I'll describe a few steps you should take during the week. The focus will be on actions that affect your financial security, although some will involve your health and lifestyle, since these topics are all related. The goal is to help you answer important questions such as:
I can start collecting Social Security Benefits any time from age 62 to 70. The earlier I take them, the less my benefit will be, so there is some strategy to deciding when to pull the trigger. I want to figure out the ideal time to do it, and I'm also curious how much money I would have had to save up to provide the same stream of income that Social Security will provide. So I did a little calculating to see how much difference it makes.