Smart planning can go a long way when it’s time to retire

Friday, Aug. 10, 2018 8:42 PM

Over the last few weeks, four friends have decided that it was time to retire.

Retirement should take some planning – at least five years is the recommendation. Because the national average age for retirement is 63, planning should start at 58. Unfortunately, many people put more planning into their vacation.

So it isn’t surprising that bankruptcy numbers have increased for baby boomers more than any other age group. According to the 2016 Retirement Confidence Survey, 64 percent of us have saved less than $50,000 for retirement (excluding home value). As of June, the average monthly retirement Social Security benefit was $1,413.37. If our average monthly expenses are $3,666, that $50,000 would be gone in less than two years. In La Plata County, almost 20 percent of residents are 62 or older. Nationally, 85 percent of people 65 and older draw Social Security.

I am going to share some little known information for your retirement planning. For starters, people who decide to draw on Social Security before full retirement age, which is around 66, will incur a permanent reduction of between 22 and 25 percent in their monthly draw. That $1,413 check just dropped to $1,060. Medicare hospital insurance kicks in at 65 (at no cost to participant), but enrollment is expected for Part B (medical services) within a seven-month window around that 65th birthday. If you miss it, the annual penalty of 10 percent starts to accumulate.

Did you know that your Medicare Part B is determined by the modified adjusted gross income from your income tax two years earlier. Medicare typically begins at age 65, which means the year you turn 63 is the year you need to start planning.

Delaying retirement three to six months has the same impact on retirement standard of living as saving an additional 1 percentage point of labor earnings for 30 years, according to John Shoven of Stanford University. In other words, if you bump up how much you save for retirement by 1 percentage point 10 years before retirement, it has the same impact on the sustainable retirement standard of living as working a single month longer – just one single month longer. Of course, it is fantastic if one can do both.

I have had people tell me that they are taking their Social Security as soon as they can (despite the 25 percent reduction) because they have heard that the Social Security trust fund is due to run out of money in 2035. This column doesn’t have enough room to explain the fallacy of that. The reality is that even if Congress did nothing between now and 2034, there would still be enough revenue coming in on a daily basis to cover about 75 percent of promised benefits. One action in place is the full retirement age, currently at 66, will go to 67 for those born in 1960 and afterward. That takes effect in 2027.

My recommendation is to create a “pre-retirement” checklist of what you need when you’re 64. What do you need to do, such as signing up for Medicare at 65 and understanding your personal Social Security options?

As a woman, the greatest fear is to be relegated to being a bag lady and living on cat food at 82. Yes, we make 80 cents for every dollar a man makes, so fear needs to be a driving preventive force. Men, be sure your loved one is taken care of as well.

Wendy Rice is the family and consumer science agent for the La Plata County Extension Office. Reach her at or 382-6461.Wendy Rice