PLANADVISER - Fall 2023 - 14

Client Material: The Potential Benefits
And Features of Working Longer
Share this piece with clients to help answer key retirement planning questions
Account Balance at Retirement
T
hinking about retirement can be exciting. It's an opportunity
to travel more, take up new hobbies and spend
more time with loved ones. Yet, planning for retirement
can also be stressful with many complex questions: Have
I saved enough? How long do my assets need to last? What
about health insurance? Am I ready to leave the workforce
and my career?
What's the Best Age to Retire?
While good saving and investing habits are critical components
of retirement lifestyle and income, one of the most powerful
tools participants have is deciding at which age to retire.
Working longer has some obvious benefits, such as salary,
employer benefits coverage and more time for assets to grow.
Other benefits may be less apparent, such as the impact on
Social Security payments and how a later retirement date can
affect withdrawals from retirement accounts.
The hypothetical example on the right shows the impact
that working longer could have on retirement savings. We
looked at four participants, all age 60 and with a 401(k)
account balance of $500,000. Each is projected to retire at a
different age, and, as you can see, working longer could have
a significant effect on the person's account balance. Youshi,
Melody and Valentina saved more, both via their savings and
employer contributions, than Jeff did, and their accounts had
more time to grow.
Assumptions
Starting age: 60
Account balance: $500,000
Salary: $80,000
Annual salary increase: 2.0%
Employee contribution amount: 6.0% of pay
Employer contributions: 4.5% of pay
Annual investment returns: 6.0%
Assumed life expectancy: age 85
76% higher balance than Jeff's
$1,019,116
WORKED
8 MORE
YEARS
THAN
JEFF DID
$828,590
WORKED
5 MORE
YEARS
THAN
JEFF DID
43% higher balance than Jeff's
24% higher balance than Jeff's
$719,758
WORKED
3 MORE
YEARS
THAN
JEFF DID
RETIRES AT 70
YOUSHI
RETIRES AT 67
MELODY
Account Balance
Why is Youshi's account balance so much larger than
the others?
* More savings: Youshi contributed to his retirement
account over a longer period.
* More employer contributions: Youshi received an
employer contribution for a longer period.
* More compounding: Youshi's savings grew for
a longer time.
Translating Account Balances Into
Retirement Income
Account balances are only one part of the story. What really
matters is how much income a person will have in retirement
along with expenses. Understanding Social Security and its
impact on retirement income and the surviving spouse is
critical. For many prospective retirees, the Social Security
full retirement age (FRA) is 671
. Social Security benefits can
begin at 62; however, claiming Social Security before your
FRA reduces benefits2
. On the other hand, after you reach
SPONSORED
RETIRES AT 65
VALENTINA
$579,796
RETIRES AT 62
JEFF
PLANADVISER - Fall 2023

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