The vast majority of baby boomers have not accumulated enough savings to completely retire with their standard of living at the age of 65. This is the sobering conclusion of recent studies by the Stanford Center on Longevity. As a result, boomers will either have to work longer to reduce their standard live retirement or make a combination of the two. It is also important that they make the best use of their modest financial resources.
That means baby boomers need to make some decisions. The following are the five most important retirement decisions that will have the greatest impact on the financial security of most older workers. If you are in this category, you need to specify:
- When and how to retire (including the question of whether to work part-time for some time)
- When do you begin to claim social security benefits
- ? ] How to Build Your Retirement Income Portfolio, Including the Use of Retirement Savings and, for the Lucky, Possible Retirement Benefits
- What decisions are to be made regarding and Health Insurance
Reduce Five Scenarios
Consider an example that illustrates the power of the first three possibilities. We'll look at a couple, both 62 years old, who have over $ 350,000 in pensions (which, by the way, is above the average savings amount for similar older workers). Consider the following five scenarios for possible choices:
- Retire at the age of 62, begin immediately with the beginning of social security and start deducting retirement
- Implement a downshift strategy through part-time work that is just enough to cover the cost of living But if you do not make an extra contribution to saving, you start social security and savings at the age of 66.
- Work full time until the age of 66, while continuing to make savings before you begin social security and savings
- until the age of 70, then start social security and savings
- full time to work 70 years , then start social security and savings
The graph below shows the estimated annual retirement income for each of these scenarios (according to my calculations). [1
here are some important conclusions that we can draw from this chart:
- There is a big difference between the retirement at the age of 62 years and an estimated retirement income of $ 42,586 retirement at the age of 70 with an estimated retirement income of $ 73,167, which makes the period between the ages of 62 and 70 the "age opportunity zone." Decisions on work and retirement during that time can significantly affect your retirement savings.
- Compare scenarios 2 and 3 – downshifting between the 62nd and 66th lives year and full-time employment during this period. These two scenarios show little difference in pension income. Older workers who wish to take some time to enjoy their lives might want to consider a downshift to make that choice. Scenarios 4 and 5 also compare a downshift strategy with full-time employment until the age of 70.
- Social security benefits protect against inflation risk, investment risk, longevity risk, cognitive decline and death of a spouse. The chart shows that social security accounts for the majority of retirement benefits for most workers. For this reason, it is important to optimize .
- Any volatility in retirement income caused by stock market investments focuses on the relatively small, light green areas of the chart. This could give retirees insight into the amount of retirement assets they can invest in stocks.
Your Pension Planning Task
Much of your pension planning task is to learn as much as possible about earning income after you stop and understand when and how you should retire. You may want to prepare your own version of the diagram above, or find a qualified Financial Advisorwho can help you with this analysis.
My recent book "Retirement Game Changers: Strategies for a Healthy, Secured and Fulfilling Long Life" details the benefits and issues of a downshift strategy as well as other key decisions that older workers face when retiring are.
In any case, it is advisable to spend some time with the decisions that you should make during your own retirement plan.
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