EXAMPLE ONE Working longer to save more for retirement is a good idea. But when people start to get serious about retirement planning, they are almost always shocked and dismayed for two reasons:

 

One, they discover that they simply haven’t saved enough. According to the Employee Benefit Research Institute’s 2017 Retirement Confidence Survey, 45 percent of workers ages 55 or older have less than $100,000 in savings and investments. That won’t go very far once they’ve stopped working. The institute — an independent nonprofit with no political partisanship — is quick to stress that the figure does not include any equity people may have in their home, or if they have a traditional pension. But only 13 percent of baby boomers do have the latter, according to a Pew Charitable Trust study released earlier this year. So, a lack of savings is problem one. Problem two? Most people don’t think they have much more time to save. Just about everyone bases retirement projections on quitting work at age 65.

 

My typical suggestion for solving both these problems? Retire at age 70 instead.

 

It sounds so simple, right? You have five more years of job income, five more years during which you can save and five fewer years that you will have to pay for all your expenses out of your retirement savings. On top of all that, delaying when you take Social Security yields greater monthly benefits. For a baby boomer born in 1962, “full retirement age,” according to the Social Security Administration, is 67. Your benefits increase 8 percent a year, every year, until age 70, if you defer. (There is no increased benefit for waiting beyond that.)

 

All these factors make a huge difference, as I was always quick to point out.

 

By working five more years, a husband and wife who are both 55 today, earning a combined $120,000 a year with retirement savings of $75,000, would end up with 47 percent more a year to live on at age 70. That’s assuming they continue to save 10 percent of their income each year, and withdraw 4 percent of savings each year in retirement. A huge part of that 47 percent increase comes from higher Social Security benefits. If our hypothetical couple apply for Social Security at age 65, they are in essence penalized for not waiting two years. They would each receive $3,348 less a year.

 

EXAMPLE TWO Implicit in all my retirement advice was the assumption that everything in life moves in a straight line. For example, once you begin saving, you keep saving. But as the father of four, I have come to realize life is not that orderly. For instance, I used to believe that people edging closer to retirement usually had the ability to save more, since child-rearing expenses were no longer a factor. So they could take all that money they had been putting toward college, for example, and invest it for retirement. Well with their children graduated, and now all that tuition money might be going to: home repair, healthcare costs, etc. While the children were still in school, they put off every major expense they could in order to fund the very expensive colleges of their choice. In the process, the home could have went from shabby chic to simply shabby. A new roof, a paint job (inside and out), upgraded air-conditioning, a new driveway and the like will eventually take care of that. But all that is going to cost money that could have otherwise gone toward their retirement. It’s something retirees don’t think about later on in life

 

Based on what I know now, I have put an addendum on the retirement advice I give to people: “And no matter how much money you think you are going to need, save another 15 percent, just in case.”