After analyzing 292 different retirement income strategies, the research team identified the best way for most people to withdraw their money in retirement: It's called the "spend safely in retirement strategy" (SSiRS) and involves delaying Social Security payments until age 70, which could mean working longer.
"Delaying retirement, even if for a few years, can significantly increase the eventual retirement income," the report notes.
To show you just how powerful it can be, the research team ran the numbers. In one example, a hypothetical, 62-year-old middle-income couple earns a combined $100,000 and has $350,000 in retirement savings.
The researchers calculated what the couple's retirement income would look like under five different scenarios: retiring completely at 62, working part-time until 66 (their Social Security full retirement age), working full-time until 66, working part-time until age 70 and working full-time until age 70.
The longer the couple waits to start Social Security benefits and drawing down their retirement income, the greater their income in retirement will be:
The amounts shown are in today's dollars, not adjusted for inflation. For the full-time working scenarios, the report assumes the couple is contributing 10% of their income to their retirement savings each year until they retire. For the part-time working scenarios, the report assumes the couple doesn't make any additional contributions to their retirement savings during this time (they live off their part-time income and delay Social Security).
As the chart shows, if the couple retired at 62, their annual retirement income (including Social Security benefits and the amount they draw down from their retirement savings) would be $37,585. If they worked full-time until age 70, their annual income would be nearly double: $70,755.
The researchers assume they're withdrawing between 2.8% and 3.6% of their retirement savings each year, percentages they determined using the same methodology the IRS uses for the required minimum distribution (the IRS requires you to make minimum withdrawals from your retirement savings starting at age 70 ½, known as the required minimum distribution, or RMD).
Even if the couple waited until 66 to retire — and worked either part- or full-time — they'd have a much bigger income than if they settled down at 62.
Next, the research team looked at "replacement ratio," which is your income after retirement, divided by your income before retirement. "Financial advisors say you need to replace 70%-80% of your pre-retirement pay to be comfortable," Steve Vernon, co-author of the report, tells CNBC Make It. "So we converted the dollar amounts of retirement income into a replacement rate."
Not surprisingly, delaying retirement results in much more favorable replacement rates:
If the couple retired at 62, their replacement rate would be 38%, "far lower than the recommended 70%-80%," Vernon notes. The only scenario in which the couple gets to the recommended rate is if they work full-time until age 70.
As the report notes, "Most older workers will fall short of commonly recommended retirement income targets, unless they can work in some manner into their late 60s or 70s. Otherwise, they might need to learn how to live on reduced spendable income compared to their working years."
Ultimately, everyone's scenario is different, and people choose to retire at all different times in their lives. "There is no perfect retirement income strategy," Vernon says. The report, he adds, is trying to help people make an informed decision about when to retire and how to deploy their retirement savings.
Not all experts agree that 70 is the "new retirement age."
"Let's do the reality check on retiring at 70," David Bach, bestselling author of "The Automatic Millionaire," tells CNBC Make It. "The average person in America retires at 62, certainly before 65." There are a few reasons for this, he says: health issues, less energy or being forced out of the job.
"I'm not against working until you're 70," says Bach. "If you love what you're doing and you can keep up until you're 70, fantastic. I know people who work in their 80s. Great, if you can. … But don't assume that you've got an extra decade right now to save money because somebody else told you 70 is the new 60."
Rather than planning on working longer to set yourself up for your golden years, start saving more money now, he says: "The way you get the best return on retirement — I call this ROR — is you save, save, save, save, save. … And you retire in your early 60s, able to afford it, and then you really go have the best years of your life."
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