Looking for a key to security? Work longer
The key to a secure retirement isn’t saving more. It’s working longer.
Or at least so says research published by the Center for Retirement Research at Boston College (CRR). “Working longer is one of the most effective ways to improve prospects for a secure retirement,” wrote Geoffrey Sanzenbacher and Steven Sass, authors of Is Working
Longer a Good Prescription for All?. “It increases monthly Social Security benefits, allows more time for saving in 401(k)s and shortens the period of retirement that assets need to cover.”
Working longer is also widely seen as a reasonable response because, the authors wrote, people are living longer and healthier lives. The question, however, is whether this prescription is realistic for individuals across the socioeconomic spectrum, from less-educated workers to educated workers.
And the answer is a qualified yes. “The basic advice is that working longer is by far the most effective way to gain a more financially secure retirement,” Sass said in an interview. “Retiring at age 70, as opposed to age 62, increases your Social Security monthly benefit at least 75%.” ❚ Work to at least full retirement
age. According to Sass, less-educated workers typically plan on retiring too soon to gain a financially secure retirement. “They might not need to work till they’re 70,” he said. “But they should plan on working into their latter 60s or at least to their full retirement age or FRA.” FRA is the age at which a person may first become entitled to full or unreduced Social Security retirement benefits. ❚ Higher survivors benefit. Working to FRA or beyond comes with one big benefit. “If you’re married and the higher earner, your widow(er) will get that
higher monthly Social Security benefit as your survivor,” Sass said. “And that should push the present value of the Social Security benefits for most such workers in favor of delay.”
❚ Money in your nest egg. Working until FRA or beyond does require, however, that you have enough money earmarked for retirement. “A key strategy is building a ‘nest egg’ before retirement to draw from instead of starting Social Se- curity right away to gain the benefits of larger checks,” said Daniel Keady, chief financial planning strategist for TIAA.
❚ How you can work longer. Keady suggests investing in yourself by updating your skills before you may need to retire from your current position. Sass agrees that you might need to look elsewhere. “The first thing is to get a job that will allow you to work longer,” he said. “If that’s not your current job, find an-
other.” ❚ Consider part-time work, retiring
at different times. If full-time work is not an option, part-time employment income can make a large difference. Also: If one spouse may not be able to work longer, can the other? “Both earners retiring at the same time may not be an option for some couples,” Keady said.