When you’re making financial plans with your clients, the traditional age to plan on retiring is 65. After all, that’s when many Americans can begin collecting Social Security benefits, so that’s when they’re expected to leave the workforce.
However, many are electing to push their retirement back a few years, and for a few good reasons. Here are some compelling arguments for encouraging your clients to wait until 70 to retire:
Longer life spans
When the Social Security Association was founded more than a half-century ago, Americans simply had a shorter lifespan than they do today. According to the SSA, a man who is currently 65 can expect to live another 20 years, while a 65-year-old woman will likely reach 87. One out of every four 65-year-olds will also surpass 90 and 10 percent will see 95.
So, those who are planning on retiring today have a 25 percent chance of requiring enough savings to live for another 25 years. Are your clients financially prepared to do so without outliving their savings? Will they be able to maintain their standard of living? If so, will they still have money left over to leave to their children and grandchildren? Make sure they understand the long-term financial possibilities before deciding on the best age to retire.
One of the biggest drivers for delaying retirement is the amount of Social Security your clients will ultimately collect. Your clients can earn an extra 8 percent for each year they delay collecting benefits until the age of 70, at which point they can collect the maximum amount available. According to the Center for Retirement Research, your clients stand to collect an additional $100,000 over their lifetime.
This is just simple math. The longer your clients work, the more money they will be able to save. Consider this: If your clients put 20 percent of their paycheck into a retirement account, in five years, they will have added a full year’s salary into savings. This can help your clients more comfortably maintain their standard of living, travel or spend on their families.
Time on their hands
Many Americans have a very idealized vision of what their retirement will look like. However, the truth is that 20 or 30 years is a lot of time to fill. If your clients have held a steady job for their entire adult life, having numerous years of an empty schedule may not have the relaxing effect on their lives that they expected. In fact, Ken Dychtwald, CEO of Age Wave, a consultancy focused on aging populations, told MSN Money that the average retiree watched nearly 50 hours of television per week last year.
In many cases, seniors end up reentering the workforce in a part-time capacity to both supplement their income and fill their days.
Retirement at 65
Of course, no single plan is right for every person, which is why they trust you to give them sound financial advice and help them work through their retirement planning process. Some of your clients may be itching to retire right at 65, or even a little before. For high net worth individuals who have spent years building a successful financial portfolio, this may be a completely viable option.
But for those individuals, be sure they have solid long term care plans in place. Even if they are comfortable in savings, an illness or injury that requires months of intensive care can drain money away with alarming speed, leaving them unable to keep up their standard of living or leave money to their family members.
Latest posts by Highland Capital Brokerage (see all)
- Meet Advanced Planning Team Member Austin Jarvis, J.D., MBA, Vice President of Advanced Sales – Taxation - March 12, 2019
- The Highland Advanced Planning Team - February 28, 2019
- February 2019 LTC Newsletter - February 21, 2019