My client, who is single and 64, retired at age 62 but didn’t start taking Social Security then. Instead, she set a goal to start claiming at her full retirement age of 66, to get 100% of the benefit she has coming to her. She is in amazing health. Her dad is 88, and still going strong. Susan has minimal debt, about $45,000 left on a 15-year mortgage, which she will pay off by the time she is 67. She lives modestly but is a great saver. She contributed the maximum amount to her 401(k) on a pre-tax basis (no catch-up though) and the maximum amount to her Roth IRA (including catch-up contributions).
Susan is very forward thinking. She purchased long-term care insurance through a group plan even before I met her (she started retirement planning with me when she was 54). Because she doesn’t have children, she was 100% comfortable purchasing LTC. She didn’t want to be a burden to her siblings.
She is mainly concerned with longevity risk and wants to make sure her savings will last, but also likes the flexibility of her plan.
Conclusion: First, I think it’s important to decouple the decision to retire from the decision of to start claiming Social Security. Susan’s case shows how these decisions are separate and distinct. And she built in some wiggle room: Even if she decides she can’t wait until her full retirement age, she won’t experience as significant of a reduction in her benefits as she would have if she had started taking them when she retired. For her, the middle of the road is the right place to be.
