Live for Today
(CONTINUED FROM PAGE 44)
is that you have a job that supports
you and helps you preserve your retirement security by not beginning to
draw down your savings. We’re talking about a few extra years of working
to secure your finances for decades.”
Come on—decades? Working a few
years more can’t possibly make
that much difference.
Most retirement experts say that it
does. The Retirement Policy Center
at the Urban Institute, for example,
estimates that for every year you work
past age 62, you increase your eventual retirement income by an average
of 9 percent. At that rate, working
eight years longer would double your
retirement income. Here’s why:
; Working longer means your retire-
ment savings need not stretch over so
many years. You’ve probably already
heard this longevity riff: A 65-year-old
man today has an average life expec-
tancy of 17 years; a woman, 20 years.
So you figure, “Okay, if I make it to 65,
I will die at 82 or 85.”
But that’s not necessarily correct.
Your life expectancy isn’t a calcula-
tion of when you will die; it’s the age
at which 50 percent of your age group
will still be alive. So if you’re 65 today,
you’ve got even odds of making it into
your mid-80s and beyond. It’s even
trickier if you’re married. There’s a
better than 60 percent chance that
one spouse of a 65-year-old couple
today will still be alive at age 90. In
other words, if you don’t delay retire-
ment—the average American man
leaves the workforce at age 64; the
average woman, at 62—the chances
are good that your nest egg will have
to stretch for 30 years.
That can spread your savings thin.
You can see the effect by plugging numbers into AARP’s retirement calculator ( aarp.org/retirementcalculator).
Based on AARP’s assumptions, a
60-year-old woman making $75,000 a
year who retires at age 62 with a nest
egg of $250,000 can sustain an annual
What It Takes to Keep Working
EVEN BEFORE THE GREAT RECESSION
triggered massive layoffs, older workers
often faced unique job disruption. About
one-third of workers ages 51 through 55
in 1992 were involuntarily bounced from
their jobs by the time they reached their
mid to late 60s, according to a 2009 Urban
Institute study. One-fourth lost their jobs
because of a layoff or business closing;
another 12 percent were forced to stop
working because of illness.
But the upside to working through your
60s is so strong that it’s worth fighting
back to stay on the job, if you can. These
principles should help.
“Retirement is a bit of a black hole,”
says Working Longer coauthor Sass.
Be a problem solver “Look around and
see what holes your employer needs to fill,
then offer to step in,” says Sass. “The more
flexible you are, the more valuable you are.”
Move the goalposts If you’re still harboring thoughts that retiring at 62 is “right,”
you risk mentally retiring at 60 or so. That
makes you easier pickings if the boss
decides to cut overhead. Plan to work
until at least your late 60s and you will
stay more engaged in your work.
If you have to switch jobs, plan on
making less Some good news: If you’ve
been at your job for a long time, you’re in a
better position than colleagues with less
tenure. “Older workers are better protected
from losing a job, but once they lose that
job, they have a much harder time [than
younger workers] finding a new job,” says
Richard Johnson, an Urban Institute
retirement-policy expert. And the next
job will likely be at a lower salary, so don’t
hold out for a fatter paycheck. Remember, though, that the main goal is to earn
enough to cover your living costs.
Quitting is not an option Don’t think
you can give full retirement a whirl at age
62 and then just go back to work if your
new life doesn’t shake out as expected.
Take care of yourself A healthier you
increases the odds you’ll be able to keep
working. It also makes it likelier you’ll enjoy
your 60s—and beyond. —C. A. F.
income of about $31,000 through age
91. That same nest egg could support
a healthier income of nearly $41,000
if she didn’t touch her savings and
delayed retiring until age 70.
; You give your savings more time
to grow. If you work until age 70,
your nest egg will be bigger than at
62 because it has eight more years
to incubate. As long as you have a re-
spectable amount saved by 60, letting
that money grow undisturbed matters
more to your financial security than
does your adding new cash each year.
If you have $250,000 in your 401(k) at
age 60, the 7 percent annual rate of re-
turn assumed by T. Rowe Price would
add $17,500 to your account in the
first year alone. That’s probably more
than you’d contribute to a 401(k) or
IRA. Over 10 years that 7 percent rate
would lift your savings from $250,000
up to $500,000 by the time you retire,
even if you never saved another penny.
; You can delay claiming your Social
Security. Individuals can begin receiv-
ing benefits as early as age 62. But as
the table on the opposite page shows,
you’ll lock in a higher payout if you
hold off. “People’s jaws drop when I
tell them how much bigger their ben-
efit will be if they wait,” says Sass.