Close to half of all workers plan to delay retirement until after age 65, according to the Center for Retirement Research. This affects the amount people believe they need to save for the future, as well as the amount future retirees project they'll receive in Social Security benefits.
I am not one of the workers planning to work after 65. In fact, when I make my plans for retirement, I do so assuming I'll leave work at 62 and claim Social Security benefits as soon as I can. Here's why.
Why I'm planning to claim Social Security at 62
I'm not planning to retire at 62 because I can't wait to stop doing my job. In fact, I love my work and I hope to keep doing it well into my 70s or my 80s.
Unfortunately, I realize that life does not always go as planned. In fact, the Center for Retirement Research found close to four in 10 workers had to retire earlier than they had expected. Family issues, health problems, or lack of employment were just a few of the many reasons why workers ended up retiring early despite plans to work for many more years.
Because I know I might have to stop work early to care for aging parents or deal with my own health issues, or because I might not be able to find anyone to hire me late in life, I am making plans for the worst-case scenario. That scenario involves being forced out of the workforce in my early 60s and needing to claim Social Security benefits at 62 to supplement my savings.
By planning for this outcome, I'm making sure I base my retirement savings goals on having enough to live on if I get the lowest possible Social Security benefit and my retirement savings need to sustain me for a long time.
If it ends up that I can work for longer and wait to claim Social Security benefits, the extra monthly income I get -- plus extra money I can save -- will simply mean I can enjoy life more.
Always plan for the worst-case scenario when deciding how much to save for retirement
When it comes to retirement planning, it's always better to be safe than sorry. That means figuring out the amount you'd need to have saved if you had to retire and start receiving a reduced Social Security benefit at 62.
Claiming at 62 rather than 67 (my full retirement age) will mean a 30% reduction in my standard benefit. It means I'll need more savings to support me to make up the shortfall. If I didn't plan for this and instead anticipated working longer to get a bigger benefit, I could be in dire straits if unforeseen circumstances force me out of work sooner than expected. And the same is true for anyone making a retirement plan that hinges upon working well into your 60s or even into your 70s.
By the time you get to retirement age and a problem arises, it will be difficult or impossible to course correct. After all, if you can't find work or aren't healthy enough to do so and you have too little saved, there's not much you can do except accept a drastically lowered standard of living.
You don't want to find yourself in this situation -- and you won't if you've based your retirement savings goals on the assumption you'll be retiring and claiming Social Security as soon as you become eligible.
You should plan to claim Social Security at 62 too
To make sure you're prepared for whatever comes your way as you age, you should also make your retirement plans as if you'll claim Social Security ASAP and face the resulting cut in benefits.
By anticipating a lower income from Social Security, you'll know how much more you need to save so your investments will give you enough to still maintain your standard of living in your golden years. If you get lucky enough to be able to work longer, save longer and delay claiming benefits, you'll just have more money to enjoy life.