Why waiting 3 more years for benefits will help this 66-year-old

Written by
Peter Dunn

Hey Pete: I’m 66 years old, still working, a year away from taking social security, and I’m wondering how in the world I’m going to make the $80,000 in my retirement nest egg last the rest of my life. I have a small pension of $3,732 annually, my current work income is roughly $19,000 annually, and my projected Social Security income is about $16,500 annually. Can I do this? It seems like I don’t have much margin for error. I’m pretty frugal, but I’m also definitely nervous about this.

– Dan

Dan: Besides your projected razor-thin monthly margin, natural concerns about health care expenses for someone in their late sixties and a nervousness about the finite nature of your emergency fund, there's not a doubt in my mind that you can retire next year. Easy peasy, right?


I feel this way about literally every single retirement emailer who sends their words in my direction. My comments are not personal, they're really personal. I’m terrified for you.

I’m terrified for anyone who shuts off a reliable source of income, makes a rather permanent decision to activate another source of income, and then gives it a go for at least a couple of decades.

But there’s good news. You’re nervous about this.

Let’s spend a moment getting the ugly stuff out of the way.

I don’t think you should regularly tap your nest egg. I know what you’re thinking upon reading that: “Okay, I’ll take an annual distribution instead of monthly distributions.”

No. I don’t want you to depend on it at all. Your projected income-to-expense battle seems too tight to me. This matters because in the year 2019 it’s tight. In the year 2020 it will force your face into a perpetually concerned furrow. And sometime around 2030 you're operating with a planned deficit due to the cost of goods and services rising.

So the math tells me you shouldn’t retire next year. I fear that if you do, you’ll be in really bad shape in ten years.

You’ve been baking your Social Security retirement cake for roughly 45 years. But it needs another three years in the oven. It will taste better then. Instead of receiving $1,375 monthly next year, you will earn about $1,700 monthly at age 70. That’s an increase of around 24 percent.

There’s no doubt you’ve heard the debate rage-on about when to take your social security retirement benefit, but most of those debates assume the recipient isn’t dependent on the benefit. You will absolutely be dependent on the benefit.

Ideally, by working another few years, you will be able to avoid tapping your $80,000 and it might even grow a bit. But while that’s happening, your benefit will continue to increase, positively impacting age 77 and beyond.

When people visualize a successful retirement, they often imagine the first business day after they retire, or some other moment in the not too distant future. I get that. I’ve done that too. It’s fun, so go ahead and do it now.

Now stop.

Visualize retirement at age 80. At this point, you’re 13 years in, and the imagery isn’t as sexy. The commercials typically don’t show this part.

A working person has the ability to replenish his depleted emergency fund with future income. A retired person, especially one with slim margins, doesn’t possess this same luxury. And that pretty much captures my main concern for you. In a perfect world, a nest egg can provide supplemental income which reinforces your primary sources of income as your retirement progresses. And in an even more perfect world, this nest egg is separate from an emergency fund. Your nest egg can’t be your nest egg if your nest egg is busy being your emergency fund.

Supplement your future retirement income now by resolving to retire at age 70. It will build in some additional margin now, even though you won’t need that margin for a decade or more.

I’m visualizing you thanking me when you’re 80. You look great, and your emergency fund is mostly intact.

This article is published courtesy of USA Today.

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