Retirement: What’s the Magic Number? (And the Lottery Doesn’t Count)
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At the age of 58, reality is starting to magnify when retirement comes into play and what impact, if any, there will be on our standard of living. So what is the magic number in having savings to retire and what age to retire?
Unfortunately, for many individuals, their magic numbers for retirement are tied to lottery tickets with 1.5 million+ to one odds of paying off. The Center for Retirement Research at Boston College reports that less than half of Americans can retire at the age of 65 based on their savings or pensions (and assuming Social Security continues to pay). A June 2012 study (which was written about in USA Today if you wish the condensed book version) ) finds than just 49 percent of Americans have adequate retirement savings or pensions to comfortably retire at age 65.
But there is hope according to this study, if the individual puts off retirement to the age of 70, when 86 percent of the households could comfortably retire. The Boston College research finds that 30 percent of Americans could retire at the earliest they can collect Social Security (at the age of 62), but more than of six out 10 of those falling into this category have what are known as “Defined Benefit Plans” or what are typically known as pensions. And that assumes no erosion of benefits or payouts—not a certainty in today’s world.
While there is no ‘One Size Fits All” strategy for pending retirees, the Center for Retirement Research and other experts recommend the following:
- Work as long as you can
- Avoid dipping into your savings and retirement benefits as long as possible
- For most retirees, a lump sum payment is not their optimum solution
- There are two options if you have inadequate savings to comfortably retire:
- Work longer
- Save more
- Regardless what age you commence collecting Social Security benefits, the payment is designed to pay you the same lifetime amount assuming you live an average life expectancy (big assumption)
- 27 percent of the population (21 million Americans) expect Social Security to provide the majority of their retirement benefits (54 percent of all women)
- Up to the age of 70, each year a person delays Social Security increases their annual payments 7 to 8 percent
- Estimating life expectancy
- Analyzing the best time to collect Social Security
- Considerations for a surviving spouse
Tomorrow’s blog will include another perspective on the amount one needs to retire comfortably based on their current earnings.