Are You Making This Dangerous Retirement Planning Mistake?
Reading Time: 2 MinutesLast Updated: April 27, 2017
NOTE: A version of this article was previously published on Suze Orman’s website on April 7, 2016.
I am concerned that many of you are banking on a retirement strategy that may not work out. According to a national survey by the Employee Benefit Research Institute, more than four in 10 Americans say they plan to keep working past the age of 65.
For many of today’s workers, the motivation to delay retirement is financial. A concern they lack the savings to cover all their retirement costs, including health care expenses.
It’s a logical plan to address a major concern, but I need you to listen to me: thinking you can just keep working may be unrealistic. In the same survey, just 15 percent of retirees said they kept working past age 65. That’s a serious gap between expectations (40 percent plan to keep working past 65) and real life (Only 15 percent kept working after age 65.)
Many of those who retired earlier than they expected were sidelined by illness or disability. Taking care of a family member can also derail plans, as can being laid off or pushed out of a job by downsizing.
If your retirement plan is centered around the assumption you will just keep working longer, please consider these important steps:
- Keep saving. If you aren’t saving for retirement, or pushing yourself to save even more, you’re putting your future security at risk. The best way to navigate the unknown is to hope for the best and plan for the worst. In this case, not being able to keep working longer is a “worst” case scenario. Plan for that by committing to save as much as possible today in your retirement accounts.
- Keep Sharp. I know you’ve heard plenty about keeping your work skills up-to-date, but many of you still haven’t done much. If there’s no on-the-job training available, check for online courses; there are plenty of terrific web-based classes you can take. Or look into whether your local community college has useful courses in your field.
- Keep Fit. The healthier you are, the less susceptible you may be to certain illnesses. There’s also the mind-body connection; I’m a believer that when you feel physically strong, it spills over into a frame of mind that can make you more valuable at work. Besides, I want you to be in the best shape possible for when you do retire, so you can enjoy yourself!
SSA does not endorse any particular financial advisory product or service.
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Tags: retirement, retirement benefits
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Suze Orman, Personal Finance Expert
Suze Orman is an award-winning personal finance expert.
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Nita
Can I still work almost full time (4 days @ 8 hrs day) to apply for social security? I am 67 going on 68 in 4 months.
A.C.
Hi, Nita. You can work while you receive Social Security retirement (or survivors) benefits. At 67, you’ve reached your full retirement age. If you work and are full retirement age or older, the amount you make at work will not affect your Social Security benefits, no matter how much you earn. Thanks.
Gayla
I have a question. I am 63 and contemplating signing up. I do not plan to work at all anymore. I have plenty of quarters of work to qualify. I understand if I wait that there will not be the early penalty. Does not working until my full retirement age have any impact on the amount? Or, is it simply the waiting until full retirement age that has the impact on the amount I will receive?
R.F.
Thank you for your question, Gayla. Your monthly benefit amount will be different depending on the age you start receiving it. The longer you wait, the higher the benefit. If you choose to start your benefits early, they will be reduced based on the number of months you receive benefits before you reach your full retirement age. If you wait until full retirement age, your benefits will not be reduced. Full retirement age is the age at which a person may first become entitled to full or unreduced retirement benefits. Keep in mind, however, any benefit estimates you receive assume you will work at the same rate and amount. If this changes, it may affect your estimate. To check estimates with what if scenarios such as these, use our Online Retirement Estimator. To help you plan for the future, you can use our Retirement Planner and you can also create a my Social Security account to verify your earnings, get your Social Security Statement, and much more. We hope this information helps.
Daron
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DJ
Mary, If you took your Retirement benefit at age 62 and had 48 Reduction months and file for Divorced Spouses Benefits when you are 65, then your Surviving Divorced Spouse’s benefit will only be reduced by 12 months.
mary
I started collecting on my own benefit at age 62. I was born in 53. My ex husband ( whom I was married to for 12 years will turn 62 Dec 2017. He made a lot more money than I did. Will my ex spouse benefit be reduced because I collected on my own benefit at age 62? I will be 64 in Dec 2017 when I am eligible to collect on his
R.F.
Hi Mary. You’re starting to collect benefits on your own record at age 62 do not affect your ex-spouse’s benefits. Also, in order for you to be eligible for divorced spouse’s benefits, and in addition to have been married for over 10 years, your ex-spouse must also be entitled to Social Security retirement or disability benefits. However, if your ex-spouse has not applied for retirement benefits, but can qualify for them (at age 62 or older), you can receive benefits on his record if you have been divorced for at least two years. Remember, if you are receiving retirement benefits on your own record and are eligible for divorced spouse’s benefits, we will pay the retirement benefit first. If the benefit on your ex-spouse’s record is higher, you will get an additional amount on your ex-spouse’s record so that the combination of benefits equals that higher amount. To learn more visit our “Retirement Planner: If You Are Divorced”. Thanks!
MARI
HEY RAY.. I THINK THAT SHE IS ASKING WHETHER OR NOT THE BENEFIT THAT SHE WILL BE ENTITLED AS AN EX-SPOUSE (AUXSPO), WILL BE REDUCED (RF) BECAUSE SHE TOOK HER OWN BENEFITS EARLIER THAN HER FULL RETIREMENT AGE (FRA), NOT WHETHER HER EX-SPOUSE OWN BENEFITS WILL BE REDUCED BY HER FILING!! DOES THE REDUCTION FACTOR PLAY A PART IN CALCULATING HER AUXSPO IF SHE IS ALREADY RECEIVING REDUCED BENEFITS UNDER HER OWN?
R.F.
Hi Mari and thank you for the observation. In general, if a person begins to receive benefits at age 62 or prior to their full retirement age, their benefits are reduced. These reduction factors are permanently applied to all of the benefits the person may qualify for. For more on ex-spouse benefits visit our Retirement Planner: If You Are Divorced for more information.
Mark
Does the Social Security payout gradually increase between 62 and 66 1/2?
R.F.
Hi Mark. If a person begins to receive benefits at age 62 or prior to their full retirement age, their benefits are reduced. The reduction factors are permanently applied to all of the benefits the person may qualify for. Please visit our Retirement Planner for more information.
DJ
Once you take your reduction in most instances it is fixed but it doesn’t mean your only choices are age 62 or 66 1/2. You can choose any month within in that period to retire. As an example if the maximum months your benefit can be reduced is 54 months, if you decide to retire at age 63 1/2 then your months of reduction would only be 36. You can elect 1 month of reduction all the way up to the 54 months of reduction.
Nelia
Hot damn, looinkg pretty useful buddy.
Ruby
I am 79 and still working a few days a week as a bookkeeper/receptionist in a small company and I have enjoyed it very much. I feel that I am in fairly good shape and it has been great for my health/mind to continue working.However I agree that at some point your body tells you that it’s time to possibly stop
Emmanuel A.
Thank you very much for quick response. Keep up with the good work.
Emmanuel A.
By starting to receive SS Benefit at 62 and suspending it after one year. How will it impact the benefit if one continue to work until full retirement age of 66.
J.Y.
Great question! Delayed Retirement Credits happen after your full retirement. Generally, benefits will increase based on the number of months you did not receive benefits between your full retirement age and age 70. These increases will no longer happen once you turn age 70, regardless of whether you continue to delay taking your benefits. You may use our Early or Late Retirement calculator to compute your exact situation. For more information, visit our webpage, Retirement Planner: Delayed Retirement Credits. We hope this helps.
DJ
Emmanuel, Assuming you have the Full Reduction Months of 48 at 62 and then suspend your benefits after 12 months and then resume receiving your benefits at age 66, your reduction will be recalculated. They will look at your 48 reduction months, see that you did not use 36 of those months and therefore recalculate your benefit with only 12 months of reduction.