RELATED: Why another financial pro thinks you should stop taking advice from Suze Orman
Suze’s suggestion that you work until you drop isn’t new. The oldest gallows humor joke in financial planning is: How do you never run out of money for retirement? The answer? Work until you die. That’s basically what Suze is saying.
This advice smacks of lazy thinking and is an attempt to put a one-size-fits-all tag on retirement. It also echoes Wall Street's self-serving fear propaganda. Remember the reports by one Wall Street investment firm that said everyone needs $2 million plus before they retire? I do. What Suze is saying is no different.
I don’t buy into fear-driven advice. And neither should you.
There are so many reasons why setting a standard of retirement at age 70 is a mistake. Perhaps the most important reason is that you may lose the sweet spot of your retirement — the years when you are healthy and active enough to live out your post-career dreams to the fullest.
You don't have to take my word on this point. A recent article from Bloomberg, titled "Americans Are Retiring Later, Dying Sooner and Sicker In-Between," relates that, "the US retirement age is rising, as the government pushes it higher and workers stay in careers longer." Here, we're talking about the steadily increasing Full Retirement Age as defined by the Social Security Administration. It was 65 for decades, and now is creeping up to 67.
The article reports that our “lifespans aren’t necessarily extending to offer equal time on the beach.” Instead, data show “Americans’ health is declining and millions of middle-age workers face the prospect of shorter, and less active, retirements than their parents enjoyed.”
So, age 70, huh? Look, the Bloomberg article admits that “postponing retirement can make financial sense, because extended careers can make it possible to afford retirements that last past age 90 or even 100.” But it goes on to say that “a study out this month adds some caution to that calculation … (showing that) Americans in their late 50s already have more serious health problems than people at the same ages did 10 to 15 years ago, according to the Journal of Health Affairs.”
It’s worth asking if we’re socking away money for our retirement, or for our estate.
Suze’s article offers three pieces of advice and reasoning for pushing retirement to age 70. Let’s pick apart her strategy and examine the flaws up close:
1. Delay tapping Social Security benefits until 70 — Say you choose to delay Social Security from, let's say, age 66 until 70. Let's run the numbers.
Let’s say your benefit is $1,500 per month at age 66, or $18,000 per year. Multiply this by four years, and you’ve got $72,000. Once you hit age 70 and start collecting that “higher payment” you were holding out for, it will take you more than 11 years to make up the missed $72,000.
For a male, that brings you to age 81, which is, according to the Social Security Administration’s Actuarial Life Table, about the age you are expected to live until. So, break even at 81 and pass away at 84. This doesn’t sound like a good move for maximizing your retirement years to me. Yes, there are considerations that make waiting until age 70 sensible (surviving spouse benefits, extreme family longevity, etc.). But saying that everyone should wait until their 70th birthday is a misguided, one-size-fits-all generalization.
Factor in all the unknowns surrounding Social Security, and waiting for that higher payment becomes even more of a gamble. I don’t believe that Social Security will go away, but it could look different in 15 or 20 years — whether it be an older Full Retirement Age or reduced benefit schedules. My advice? Work with a trusted professional to determine the age at which taking your benefits will be best for your individual retirement plan.
2. Lay the foundation now to work longer — I am reminded of a lesson we learn as children: Life isn't always fair. Meaning, in this context, we may not have control over whether our employers will keep us on payroll until our 70th birthday. Businesses love to save money by ushering out older employees who have reached their earnings peak. Workers in their 50s (let alone 60s) are frequently offered "buyout packages" in corporate cost-cutting or downsizing efforts.
There’s also quite a bit of job bias in this advice. For blue-collar workers, this advice won’t always be physically feasible. It’s one thing to suggest that a white-collar worker stay on the job until age 70. It’s quite another to ask that of a bricklayer, manufacturer or warehouse worker.
3. Truly enjoy a secure retirement — Here, I actually agree with Suze to some degree. There can be many rich, fulfilling retirement years left after 70. I work with plenty of families whose lives prove this point. Still, the decade of your 60s is a truly magical one. Would you rather spend it clocking 50-hour weeks at the office, or being focused on actively pursuing the things you love most?
What’s the final verdict on Suze’s advice? There is no such thing as a one-size-fits-all approach to retirement. Period.
And you can get to a place of retirement freedom well before age 70 — perhaps age 66, 65, 60 or even earlier. It’s not as relentlessly impossible as Suze would have you think.
Wes Moss has been the host of “Money Matters” on News 95.5 and AM 750 WSB in Atlanta for more than seven years now, and he does a live show from 9-11 a.m. Sundays. He is the chief investment strategist for Atlanta-based Capital Investment Advisors. For more information, go to wesmoss.com.
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