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Avoid Retiring Poor

Do You Have Enough Saved for Retirement?  

I was shocked recently to read the results of a recent study conducted by the Benefits Research Institute which reported that 36% of Americans have less than $1,000 saved for retirement.

I was further surprised to learn that the average retirement age in America is 62, even though the average age at which we expect to retire is 66.

The impact of these facts is that most of us are not saving nearly enough for retirement and that we don’t have as much time to save for retirement as we think we have, since we retire sooner than we think we will.  Also, if a person retires at 62 instead of at their full retirement age of 67 (for people born after 1959), their social security benefit is considerably lower than if they had waited until age 67.

Let’s look at some numbers.  If a person had average annual social security earnings of $40,000 and began taking her social security benefit at age 62, she would collect about $1,004 per month or $12,048 per year.  Other than cost of living increases, the monthly benefit will not increase as she gets older.  It is locked in.  If she waited until her full retirement age of 67, her monthly benefit would be $1,474 per month or $17,688 annually.   

This represents a 47% higher benefit by waiting until age 67.  If she waits until she turns 70, her benefit increases by an additional 8% per year.  At age 70, her monthly benefit would be $1,858 or $22,296 annually – 85% more than when retiring at age 62.

But, you might say, she would have collected the benefit for an additional five years or eight years if she begins taking it at age 62.


That is exactly correct and is one of the factors everyone needs to take into consideration.  The math shows that at age 78, she would have been better off waiting until age 67 to begin taking social security.  In other words, by age 78, the total amount she would have collected in social security benefits would be greater by waiting to begin until 67 than by beginning at 62.  By waiting until 70, this tipping point is at age 80.

Avoid Retiring Poor - Do I Have Enough Saved | Financial Health FCUSo, the question each of us needs to ask is this:  How long will I live?  Statistics show that men who reach the age of 65 live, on average, to the age of 84.3 and women live, on average to the age of 86.6.  If you are at least average, it makes sense to delay social security benefits until age 70.

Of course, this depends on other factors, too.  If you are working AND are healthy AND expect to live past age 80, waiting makes sense.  If you do NOT have employment or are NOT healthy enough to work or have a family history that does not include long life, waiting may not be your best choice.

The important thing to bear in mind is that you DO have choices.  My purpose in writing about it is just that – to make sure you know the facts and make an informed decision.  Too often people know only that they CAN begin taking social security at age 62, so they do.  They do not always think about whether they SHOULD.

Back to where I began for a closing thought. The other piece of this is the amount we have saved, or not saved, for retirement.  Most people need about 80% of their pre-retirement income after they retire.  Social security represents, depending on your income level and your retirement age, between 25% and 60% of pre-retirement income.

Unless, you are able to drastically reduce your expenses when you retire, you will need more than social security.  Generally, that comes from money you have saved or from a part-time job during retirement.  The more you can save now, before retirement, the less you will need to work during retirement.  

I highly recommend the Social security website as a source for extremely valuable information about retirement.  Go to: and spend some time gathering information. If we at Financial Health FCU can be of assistance, please do not hesitate to contact us.