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Planning to Work Until 70? Don't Count On It

By Todd Campbell - Apr 13, 2017 at 12:21PM

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If working later into your life is part of your retirement strategy, it might be time to reconsider.

A recent study conducted by the Employee Benefits Research Institute (EBRI) finds that many workers are being forced to retire sooner than they want, and that's bad news for people who are counting on working later in their life as part of their retirement strategy. 

Why 70?

Many retirees count on Social Security income for a substantial amount of their retirement income, and while you can claim Social Security benefits as early as age 62, holding off until 70 can result in a much bigger payout.

A man sits considering his retirement options at work.


Individuals receive 100% of their Social Security benefit at their full retirement age, but if they delay claiming benefits until later than that, they'll get rewarded with delayed retirement credits. Those credits increase your Social Security income by a fixed percentage for every month delayed, and the credit works out overall to about a 8% increase in benefits annually. However, credits only build up until you reach age 70.

Because there's no incentive to delaying claiming Social Security after age 70, it's probably not surprising that nearly 40% of workers plan to work at least until then.

Not so fast

It's tempting to think that you'll be able to delay taking your Social Security until you reach 70, but the reality is that many people are forced to retire in their mid-60s.

EBRI's research finds that only 4% of current retirees retired at age 70, and that the vast majority of workers retired before age 65, including 28% who retired between ages 62 and 64. According to the survey, 48% of retirees left the workforce sooner than they had planned.

Unfortunately, over 40% of retirees were forced to retire because of a health problem or disability, and more than one-quarter of respondents had to retire because of changes at their company.

Rethinking your strategy

If health problems or a downsizing at work causes you to exit the workforce prior to reaching your Social Security full retirement age, you might be disappointed by the amount you end up receiving in Social Security benefits.

Workers can claim Social Security as soon as age 62, but claiming prior to full retirement age results in a reduction in benefits for every month you claim early -- and that reduction is substantial.

For example, a person with a full retirement age of 66 who claims at 62 receives only 75% of the amount they'd receive at 66. The haircut to payments is even bigger when you compare the amount you'd receive at 62 to the amount you'd receive at age 70 because of delayed retirement credits. On average, a person with a full retirement age of 66 who claims at 62 nets 43% less per month than they'd have gotten if they'd waited until 70 to claim. 

Since you can't know for sure if your health will allow you to keep working or that your job will still be there for you in the future, it's best not to plan on working later into your life as part of your retirement plan. A better strategy is to get serious about your retirement savings. Many employers offer workers tax-deferred retirement savings plans, such as 401(k) plans, yet few people contribute the maximum $18,000 per year that's allowed ($24,000 for those age 50 and up), and typically, workers contribute only about 6% to 8% of their pay to these plans, depending on their age. While that's a good start, its more likely that you'll need to stash away 10% to 15% of your income in these plans if you want to fully insulate yourself against the risk of forced early retirement.

If contributing that much of your income to your retirement plan seems undoable right now, remember that you don't have to increase your rate all at once. If you increase your rate by 2% to 3% annually, you can get to that teens contribution rate in a few years, without busting your budget.

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