Plan for A Better Retirement
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How Does Your Age Affect Social Security?
A Case Study: John and Patty
John and Patty are both 60 years old. They have accumulated $330,000 in their retirement accounts. Between contributions and earnings, their accounts should grow by $15,000 each year.
At normal retirement age, John will receive $2,000 per month in Social Security benefits. Patty will receive $1,500.
Remember, every year everything you buy costs more. So John and Patty will need more income later in retirement.
Let’s see how the age they choose to retire impacts the financial parts of their retirement.
Better, But Still Not Ideal
Waiting an additional 3 years does two things. It reduces the Social Security discount. And, it gives them a chance to save more.
As a result, they need less income from their savings. And because they have more in savings, the withdrawal rate is better. But it still isn’t ideal.
That's Much Better
Now both John and Patty receive their full Social Security benefit. And the additional years of compounding also help. Now the withdrawal rate is 4%, which has a higher probability of success.
For good measure, let’s look at what happens if they wait until age 70.
How Does Your Age Affect Your Retirement?
Time can be your greatest asset. And this is especially true if you aren’t as prepared for retirement as you hoped to be.
Early retirement discounts in Social Security benefits work against you. It places more responsibility on your nest egg for your income needs. And we believe the biggest threat to your retirement savings is your withdrawal rate.
If you are able, working a few extra years should improve your retirement picture. Those early retirement discounts disappear. And the extra time you have to save won’t hurt either.