February 27, 2012 09:00 AM
By Jonathan Clements, Director of Financial Education, Citi Personal Wealth Management
Americans say they expect to retire at age 65. But it turns out that the typical retirement age is actually 62, according to the Employee Benefit Research Institute's 2011 Retirement Confidence Survey.
That could change in the years ahead. As many Americans struggle to pay down debt and amass bigger nest eggs, we may see more folks postpone retirement or at least continue to work part-time.
Either strategy can greatly improve your financial outlook. If you continue to collect a paycheck, you may be able to sock away more money, while leaving your existing savings untouched for longer, so they can potentially earn additional investment gains.
You might also delay claiming Social Security, which will mean a larger monthly check. In addition, when you eventually retire, if you opt to purchase an immediate annuity that pays lifetime income, you should receive more income because you are now older and thus your life expectancy is shorter. That annuity income will hinge on the claims-paying ability of the issuing insurance company.
Let's say you can work part-time and earn $20,000 a year. Today, many retirement experts suggest a 4% withdrawal rate for retirees. That means that, to generate $20,000 in first-year retirement income, you would need $500,000 in savings. That gives you an idea of how valuable even part-time work can be.
But the benefits are more than just financial. Yes, heading off to work may sometimes seem like an unexciting prospect. But your job likely also provides social, intellectual and physical stimulation--all important qualities that, if you didn't work, you would likely need to recreate on your own.
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