1032 GMT October 28, 2021
Now some experts are suggesting people set their sights a bit higher — on 70, abcnews.go.com.
The reason? Working a few more years or drawing your Social Security benefits later can significantly boost income. That's particularly important as fewer workers receive pensions. Americans largely have taken on the responsibility for saving for their retirement — often failing to do so adequately.
"We keep adding years of life and it all got tacked on to the retirement period and it never changed the retirement age," said Steve Vernon, a research scholar at the Stanford Center on Longevity in its financial security division.
As such, Vernon and his colleagues analyzed nearly 300 different retirement income methods and found that the best approach for middle-income retirees to have a reliable source of income through retirement is to wait until age 70 to claim Social Security, which is when benefits peak. They should also use the required minimum distribution calculation to determine how much to draw from personal savings, such as a 401(k) or Individual Retirement Account (IRA).
The RMD is the minimum amount that the Internal Revenue Service (IRS) said you must draw from retirement accounts each year once you reach age 70?
This approach, dubbed the ‘Spend safely in retirement strategy," in effect ‘pensionizes’ common retirement accounts like a 401(k) or IRA. It will not compensate for inadequate savings but it will help squeeze as much income as possible from existing sources.
To make it work, some retirees may have to significantly lower their living expenses.
Vernon said it's a straightforward way for middle-income workers with between $100,000 and $1 million in savings to generate a stream of lifetime income. He estimated this group represents as many as half of all workers age 55 and older. And workers need some help as most will not consult a financial planner and few calculate how much they'll need.
"You can't just tumble into retirement, you have to be thoughtful about it," he said.
Americans typically retire at age 63 and start collecting Social Security between age 62 to 64, according to research from The New School.
But waiting pays off.
Stanford researchers estimated that Social Security benefits represent up to two-thirds of a middle-income retiree's retirement income if they start drawing them at age 65. If they wait until 70, it represents up to 85 percent, according to the Stanford research.
While working that long sounds onerous to some, it doesn't have to be at full tilt.
Some workers will need to work ‘just enough’ — either in their existing field or another — to pay for living expenses until age 70 in order to put off claiming Social Security benefits. It works best if a retiree waits until age 70 as that is when benefits peak, but still has advantages for those that retire in their late 60s.
"In essence, 70 is the new 65," Vernon's report said.
Popular personal finance celebrity expert Suze Orman recently wrote that people should wait until 70 to retire, not ‘one month sooner’.
Other experts say a later retirement is a good idea for some workers, when it makes sense for their situation.