Work Longer to Receive More Benefits Later

Physician's Money DigestJune 2006
Volume 13
Issue 6

John Post is 60 years old, born right after World War II at the beginning of the post-war baby boom. He has spent his entire career in education as a high school superintendent. Most of his workdays start at 7 AM, and many do not end until after a school-related event at 10 or 11 PM. He works 6 days a week and rarely takes a vacation. It has been a year since Post's triple-bypass surgery, but he is in fair health now, and following his doctor's orders, he does his best to eat right and exercise.

A dedicated educator for several decades, Post would like to retire one of these days. Yet he does hope to return to the classroom and teach part-time. In addition to teaching, he has a long list of activities he would like to accomplish in retirement, including traveling across the nation. But continuing to work and receive extra income is extremely important to him.

Although Post did not consult with a financial professional when planning his retirement, he has always had some sort of a long-term plan, if only loosely defined. Now he wants to make sure he does not outlive his retirement income, which means working a bit longer. In the process, he will avoid collecting Social Security for as long as he can.

Collect More Later

In 2008, the first baby boomer becomes eligible to receive early Social Security benefits. The baby boom generation comprises individuals born from 1946 to 1964. Because of improved health conditions, an increased standard of living, and major medical advances, people of this generation will live longer than ever before. They are also working beyond the traditional retirement age for varied reasons. Some would like to keep active, and others work for the health care benefits. Some individuals simply are not ready to retire for emotional reasons. But many people, Post included, want to leave their family an inheritance someday. Post has decided to work as long as he can to maximize his Social Security benefits and avoid using his personal retirement savings.

The earliest that retirees are eligible to begin taking advantage of Social Security benefits is age 62. By drawing benefits early, you automatically reduce the amount you will receive on a monthly basis for the rest of your life. The example to the right is derived from the Social Security calculator at This chart assumes that you were born in 1946, just like Post, and are currently earning $100,000 a year. You can see how much can be gained by simply waiting a few years. Please note that these amounts are in today's dollars and have not been adjusted for inflation.

So why would anyone draw early? Quite honestly, many Americans are forced to take early retirement and draw on their Social Security. Due to a lack of proper retirement planning or situations beyond their control, these individuals begin receiving their benefits early at a reduced rate. In fact, Post would receive a 25% yearly reduction in his Social Security benefits if he takes an early retirement in 2 years. Some individuals reach age 62 and would like to retire, but do not have any other (or very little) retirement income in place. Without a proper plan, they are forced to collect Social Security early to help pay the bills.

Reach the Official Age

Currently, the official retirement age varies according to the year of your birth. Individuals born between 1943 and 1954 must reach age 66 to receive full benefits from Social Security. From 1955 onward, the official age gradually increases to age 67 (see htm). Post plans on waiting until his official retirement age so that he can continue to receive health care through his employer and earn income. If you do start drawing benefits early and you continue to work, there are annual earning limits, and your benefit will be reduced if you go over those limits. That's just one more reason to wait as long as possible to take Social Security.

The longer you can earn a steady income, the longer you should wait to collect Social Security benefits. Not to mention that when you begin drawing on your Social Security, your benefits will be increased by the income earned during those extra years of employment. Post also emphasized the fun factor in continuing to work. By working longer, his retirement savings can stay intact longer, and he'll have more assets left for things like vacation and hobbies. Once Post reaches his official retirement age, he can also begin to work as much or as little as he wants with no effect on his Social Security benefits. At that point, Post says, he'll return to the classroom and work as much or as little as his health—or his travel schedule—will allow.

Decide When It's Right

Many Americans collect Social Security benefits early, instead of waiting until their official retirement age. Post has many reasons to work longer and wait to withdraw his Social Security benefits. When deciding at what age you would like to retire, you should always consult with a financial professional. There are many factors to consider when making such an important decision. If you want to receive full Social Security benefits, wait. While it can be a difficult decision for some people to make, Post says it was easy for him to decide to wait a few more years. Professional advice can go a long way to helping you become independent during your retirement.

Robert Valentine, CSA, of Huntington

Beach, Calif, is with Financial and Retirement

Management, a registered investment

advisory firm. He is a registered representative

of and offers securities through

Securities America, Inc, and is a registered broker/dealer,

member NASD/SIPC. He welcomes questions or comments

at 877-732-2637.

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