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Eggstack is an independent financial technology company located in Jacksonville, Florida. Our mission is to help you overcome uncertainty about retirement planning and inspire confidence in your financial future.
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Most of us have decided on an age to retire, but have you ever considered what working one more year would do for your retirement savings? Join us as we explore how to boost your retirement savings by working one more year.
The average U.S. retirement age is 61. That is surprisingly low given all the people still working in their late sixties. But it’s an average – there are just as many FIRE proponents who actually manage to retire early.
For most people, Full Retirement Age as defined by the Social Security Administration is 67. Social Security retirement benefits get progressively smaller for each year that you begin taking Social Security prior to Full Retirement Age. Conversely, benefits get progressively larger for each year that you delay taking Social Security beyond Full Retirement Age (up to age 70).
Let’s look at an example. Bob is 60 years old and plans to retire when he turns 67. However, he only has $100,000 in retirement savings and he is concerned that it might not be enough. He wants to know how working one more year will impact his retirement savings.
Bob earns $75,000 per year and sets aside 10% for his 401(k). His employer matches his contributions fifty cents on the dollar up to 6%. Annual investment returns on Bob’s 401(k) average 8%.
If he starts taking Social Security at age 67, Bob’s monthly checks will be $2,200. However, if he waits until he’s 68 his monthly checks will be $2,376. Note that these amounts are set for life. The age you start taking Social Security determines your monthly benefit for the rest of your life.
Bob’s living expenses including housing and vehicles total $3,500 per month. His tax filing status is single and he lives in Florida where there are no state income taxes. Longevity runs in his family so Bob expects to live to the ripe old age of 90.
To determine the impact of working one additional year, we turn to Eggstack. Eggstack allows you to enter a base case and copy it to a new case. Then all you have to do is change the retirement age to 68 in the new case and voila, the analysis is complete.
For Bob, working one more year makes all the difference in the world. If he retires at age 67 as planned his retirement savings will be fully depleted by the time he turns 84. However, working that one additional year to 68 gives him money to spare. Instead of being destitute for the last 6 years of his life, Bob will have $166,000 left over to serve as a hedge against uncertainty or leave to his heirs.
Perhaps you're thinking, how can working one more year make that big of a difference? Here’s how:
Working one more year can make a huge difference in your retirement. So everyone should work one more year, right? Wrong. For every Bob who was headed into the abyss, there’s someone else who saved too much. For them, working one more year will only rob them of their well-deserved retirement. So what should you do?
Stop guessing at how much to save and start planning. Tools like Eggstack empower you to know how much you need to save and when you can retire. Eggstack can do a lot of things, this is just a simple example. It can also model Roth conversions, reverse mortgages, pensions, annuities, rental property, portfolio rebalancing, business income, tax increases, QLACs, whole life insurance, Social Security insolvency, alternate distribution strategies, home purchases and more.
Eggstack can perform meaningful comparisons between retiring in different states because unlike other financial planning software, it doesn’t just estimate your taxes, it calculates them. Eggstack computes your tax bill for each year based on the latest IRS tax code and the tax laws in your state.
Are you guessing at how much to save and hoping for the best? That is not a strategy. Retirement is 20% of your life. You owe it to yourself to start planning for it.
No one has a more vested interest in your retirement than you. After all, you’re going to be the one living it. Get serious about retirement planning and start your free plan today.
Photo credit: Pixabay Eggstack News will never post an article influenced by an outside company or advertiser. Our mission is to help you overcome uncertainty about retirement planning and inspire confidence in your financial future. This article is for informational purposes only and is not financial advice or any other type of advice. Eggstack makes no representation to the validity, accuracy, completeness, or suitability of purpose of any information presented in this article.
