If you want a secure retirement, you may have to rethink when you plan on leaving the workforce.
According to personal finance maven Suze Orman, "70 is the new retirement age — not a month or year before. "
She points out that Americans are living longer, meaning your retirement savings need to last longer. "You likely have plenty saved up to breeze through 15 years or so of retirement. But, people, if you stop working in your 60s, your retirement stash might need to support you for 30 years, not 15, " she writes on Money.
And she's not alone. New research from the Stanford Center on Longevity suggests that the typical American would benefit from a later retirement age, too.
After analyzing 292 different retirement income strategies, the research team identified the best way for most people to withdraw their money in retirement. They call it the "spend safely in retirement " strategy, and a key component of it is delaying Social Security payments until age 70, which could mean working longer.
Currently, you can start receiving retirement benefits at age 62, and the full benefit age is 66 years and two months for people born in 1955 (it will rise to age 67 for those born in 1960 or later).
According to the Stanford report, "The best way for an older worker to implement the Spend Safely in Retirement Strategy is to work just enough to pay for living expenses until age 70 in order to enable delaying Social Security benefits. In essence, 'Age 70 is the new 65.' To make this method work, retirees may also need to significantly reduce their living expenses."
If you want to leave your full-time job before 70, one option is to work part-time and make just enough to cover living expenses until age 70.
If working until 70 is out of the question for you, the next best thing to do is to use a portion of your retirement savings to substitute for the Social Security benefits you're delaying. As Steve Vernon, head of the research team, tells CNBC Make It: "Suppose Social Security at age 65 would have been $20,000 per year and you're delaying it for five years. That's $100,000. So you set aside $100,000 and that's what you withdraw from age 65 to 70."
Ultimately, everyone's scenario is different, and people settle down at all different times in their lives. To help you figure out the right amount to fund your retirement, use a retirement calculator.
Most importantly, don't put retirement on the back burner. Doing so may push your end date back even more.
If you need inspiration to kick-start your savings goals, check out:
- How to save for retirement without going broke
- New study says save at least 11% of your income for retirement—here are 5 ways to do that
- Everything you need to know about 401(k)'s, IRAs and other retirement savings accounts
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