Running out of money in retirement is the biggest concern among retirees and prospective retirees, according to a survey by the Empower Institute. It is a valid concern, especially considering that retirement is becoming more and more expensive.
However, saving for the future can be difficult and many workers are losing their savings. In fact, the average baby boomer saved only $ 152,000 for retirement, according to a report by the Transamerica Center for Retirement Studies. For many retirees, this money will not last more than a few years.
If you are struggling to save, it may be useful to adjust your retirement age. And retiring with one of these three ages can help your money go further.
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1. Age 62
When you reach your 62nd birthday, you become eligible to start claiming Social Security benefits. Keep in mind that, by claiming as early as possible, however, your monthly payments will be less than if you had waited a few years. However, if you plan to retire as early as possible and at the same time stretch your savings, Social Security benefits can help your money last longer.
In addition, retiring at age 62 means that you will not face early withdrawal penalties in your retirement savings. If you have a 401 (k) or traditional IRA, withdrawing your money before age 59 and a half will result in a 10% penalty on the amount you withdraw. Therefore, if you are choosing to retire early, it may be a good idea to wait until age 60 to avoid penalties.
2. Age 67
Applying for Social Security at age 62 will result in a permanent reduction of your benefits by up to 30%. To receive the full amount of the benefit to which you are entitled, you will need to wait until your full retirement age (FRA).
Your FRA depends on the year you were born. If you were born in 1960 or later, your FRA is 67 years old. This means that most future retirees will have to wait until they are 67 to apply for Social Security if they want to avoid benefit reductions.
There is also a common misconception that if you claim in advance, your benefit amount will automatically increase when you reach the FRA. A whopping 69% of baby boomers share this (misguided) belief, according to a survey by the Nationwide Retirement Institute, and falling into that myth can affect the age when you start claiming benefits. So, before you start the process, make sure you are aware of how the age you claim will affect the value of your long-term benefit.
3. Age 70
If you wait until you are 70 to start applying for Social Security, you will receive as much as possible each month – which can give your retirement income a big boost. By delaying benefits after your FRA, you will receive a bonus each month. If you have an FRA of 67 and wait until you are 70 to claim, you will receive the full benefit amount plus 24% more each month for the rest of your life.
Delaying benefits can be difficult for many workers, especially if you are looking forward to retiring as soon as possible. But it can potentially increase your benefits by hundreds of dollars a month, which can be very useful if you don’t save.
Remember that no matter what age you start applying for Social Security, you don’t necessarily need to retire at the same time. However, if you retire first and then wait a few years to complain, you risk running out of savings too quickly. So in many cases, it makes sense to retire and claim benefits simultaneously.
Choosing when to retire is a big decision and it is important to take it seriously. When you retire at one of these three ages, it can be easier to stretch every dollar of retirement.