When can you retire?

Max Heine

John Turner of the Trucker’s Accountant in Houston has been hearing lately from his owner-operator clients about their retirement funds. “Some of them are calling, saying ‘I got out of my 401(k) last week. It was losing too much money,'” he says. “That’s the worst thing they could do.”

Whoops. As Turner and other financial professionals point out, selling off your holdings at bargain basement prices is no way to boost savings. Nevertheless, it’s an understandable reaction that highlights the dilemma facing many Overdrive readers. With an average age in the low 50s, a large number of you are old enough to be counting the months to retirement. A retirement portfolio that’s suddenly lost 40 percent of its value puts that count into question.

If you lack a full-service financial services provider to help you re-evaluate your situation, you can learn a lot from online calculators that are free, easy and quick. Turner offers some on his website, www.jturnercpa.com.

His and others like them force you to consider matters you might not have thought about. Do you expect your income to increase yearly until you retire? What percentage of your current income will you need to be comfortable during retirement? Will your nest egg have to last 20 years? 30? Longer?

The further off your retirement, the greater the likelihood that your retirement assets will bounce back, even beyond their prior peaks. But if you anticipate a shortfall by your planned retirement date, consider one or more of these options:

KEEP WORKING. Continued full-time work, of course, will enable you to build retirement savings the quickest, but working part-time is a good option, too. More retirees are choosing this for various reasons: They’re short on savings. They like to stay active. They’d like to try different work. Given increased life expectancy, part-time income allows savings to last longer.

SAVE MORE. Granted, this is easier said than done. Turner says only 5 percent to 15 percent of his owner-operator clients have a retirement fund. One immediate reward of boosting your savings rate, even a little, is that funding an Individual Retirement Account or other tax-deferred account will lower your income tax bill.

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DELAY SOCIAL SECURITY. You can start getting payments as early as age 62. But for every year you can hold off, the payment goes up by about 8 percent, until age 70. If you feel like your days are numbered, it makes more sense to grab all you can as soon as you can. But for those who live into their 80s, the long-term payback for waiting to collect is greater, and it only gets better the longer you keep your foot away from that bucket.

USE AN HSA. If you can’t afford good health insurance any more than you can retirement savings, a Health Savings Account could be a good fit for a healthy person, notes owner-operator accountant Mark Swanson of Omaha, Neb. You have to use a high-deductible health policy, meaning you pay for all routine costs but are covered for major treatment. Not only is your contribution tax-deferred, but anything you don’t spend on health care can be withdrawn when you retire. “I have several clients who do that,” Swanson says.

What Social Security will kick in
The best estimate of your benefits is the annual mailing you get from the Social Security Administration. Or you can get a reasonable facsimile with a quick check at the agency’s online calculator at ssa.gov/estimator. It will estimate your monthly payment:

  • At age 62.
  • At “full retirement age.” That’s more or less 66, but depends on when you were born.
  • At age 70, the age at which the monthly payment would be the highest.

Once you’ve hit full retirement age, you can work as much as you want and still get your full benefit. However, if you start collecting before that age and you’re still working, earnings above a certain level will cause benefits to be reduced.