I’m all fired up by a Forbesarticle I just read, For Retirement Planning, Get the Spirit of 76 by Charles D. Ellis. It challenges thewidely-held notion that retirement must begin at age 65 and posits some verycompelling solutions to the retirement crisis looming in front of so manyAmericans.
Admittedly, my firstreaction was: really, retire at age 76 – isn’t that a bit old? But followEllis’ logic through to its conclusion, and I must say he convinced me. Hestarts by recapping the fascinating backstory of how 65 came to be the magicalretirement age in the Western world. (I won’t spoil it for you, but it involvesthe German Chancellor Bismarck, a railroad boom in Europe, and some older trainworkers napping on the job.) America adopted 65 as our retirement age whileborrowing from the best practices of Europe at the turn of the last century.But in fact, the “official” retirement age has been slowly creeping upward.
Then Ellis reveals aremarkable fact: if you can wait until you’re 70 to start drawing SocialSecurity benefits, instead of jumping on the benefit at age 62, you’ll earn 8%more for every year you defer. Ellis estimates that, with compounding factoredin, this amounts to 76% more in Social Security benefits if you can wait until70.
Where does age 76 comein? For someone who already has sufficient discipline to wait on SocialSecurity until age 70, that same person could use the 14 extra years of working(between 62 and 76) to sock away a ton of additional money into their 401(k)retirement account. Many Americans are significantly behind in their retirementsavings goals, so this is a worthy target – and not a particularly unreasonableone. Problem (almost) solved!
Do you have a “magic”number in mind for your retirement age?
CEO, TradeKing Group
[image: 76 by Stephan Mosel on Flickr]
Tradinghas inherent risk due to system response and access times that may vary due tomarket conditions, system performance, and other factors. An investor shouldunderstand these and additional risks before trading.
Investmentsinvolve risk, losses may exceed the principal invested, and the pastperformance of a security, industry, sector, market, or financial product doesnot guarantee future results or returns. TradeKing provides self-directedinvestors with discount brokerage services, and does not make recommendationsor offer investment, financial, legal or tax advice. You alone are responsiblefor evaluating the merits and risks associated with the use of TradeKing'ssystems, services or products. If you have additional questions regarding yourtaxes, please visit IRS.gov or consult a taxprofessional. TradeKing is unable to provide any tax advice.
TradeKingis not affiliated with, does not sponsor, is not sponsored by, does notendorse, and is not endorsed by the companies mentioned above or any of theiraffiliated companies.
Atthe time of publication and in the preceding month, TradeKing and/or DonatoMontanaro did not have ownership greater than 1% in any stocks mentioned; didnot have any other actual, material conflict of interest known at the time ofpublication; have not received compensation from a public offering nor frominvestment banking services related to any companies mentioned within the past12 months, nor expect to receive any in the next 3 months; nor engaged inmarket making in the securities mentioned.