PLANADVISER - Fall 2023 - 15

FRA, your retirement benefits grow by 8% per year until age
703
. If you are married and you are the higher earner, at your
death, your surviving spouse may step up to the benefit you
were receiving.
Going back to our four hypothetical pre-retirees, we estimated
their potential retirement income from their 401(k)
balances (bright blue bar in chart below) and added in their
Social Security benefits (dark blue bar). Next, we determined
the percentage of their pre-retirement income that would be
replaced by this income (gray boxes), often called a retirement
income replacement ratio. Not surprisingly, working
longer and letting Social Security benefits grow could result
KEY TAKEAWAY
Deciding when to retire
is a personal decision
based on many factors,
such as health, financial
goals and needs,
and working longer is
not always possible.
However, those who
have some flexibility
may want to consider
weighing the pros and
cons of working in
retirement as a part of
the retirement planning
process.
Another important factor in the
retirement date equation is Medicare
health-care coverage. Medicare
coverage is available at age 65. Retiring
before 65 may mean paying health-care
costs out of pocket.
in a significant increase in annual retirement income and a
corresponding increase in income replacement at the later
retirement ages. n
Estimated Annual Retirement Income
In First Year of Retirement
n Expected Social Security income
n Expected portfolio income
96%
80%
$49,998
61%
$30,954
$19,044
RETIRING AT 62
JEFF
$69,348
$54,019
$43,008
$26,340
RETIRING AT 65
VALENTINA
$32,892
RETIRING AT 67
MELODY
$46,032
RETIRING AT 70
YOUSHI
$86,911
$77,560
129%
$123,592
The retirement
income replacement
ratio is the percentage
of the pre-retirement
income you receive
per year in retirement.
Important considerations
in determining
this percentage include
your retirement age,
withdrawal rate and
Social Security benefits.
These hypothetical examples are for
illustrative purposes only and are not
intended to predict the returns of any
investment choices. Rates of return will
vary over time, particularly for long-term
investments.
There is no guarantee the selected rate
of return can be achieved. Any
investments may have fees and expenses
that are not taken into account, which
would lower the performance. Regular
investing does not ensure a profit or
protect against loss in declining markets.
Social Security income estimates from
Social Security Online as of September
2022. Amounts shown represent payment
in first year of retirement, and would be
subject to Social Security cost of living
adjustments (COLAs) in subsequent years.
Keep in mind that all investments,
including mutual funds, carry a certain
amount of risk, including the possible
loss of the principal amount invested.
investment choices.
1
Social Security full retirement age (FRA)
is age 66 for anyone born 1943 through
1954. It increases by two months for every
year from 1955 through 1959. FRA is 67 for
anyone born in 1960 or later.
2
Social Security retirement benefits are
reduced by 6.67% per year for the first
three years prior to FRA and 5% per year
for the next two years, resulting in a total
reduction of 30% at age 62 for a retiree
with an FRA of 67.
3 Social Security retirement benefits
are increased by 8% per year after FRA,
resulting in a benefit increase of 24% at
age 70 for a retiree with an FRA of 67.
The views expressed are those of MFS and
are subject to change at any time. These
views are for informational purposes only
and should not be relied upon as a recommendation
to purchase any security or as
a solicitation or investment advice from the
Advisor. No forecast can be guaranteed.
MFS does not provide legal, tax,
accounting, or Social Security advice.
Individuals should not use or rely upon
the information provided herein without
first consulting with their tax or legal
professional about their particular
circumstances. Any statement contained
in this communication concerning US
tax matters was not intended or written
to be used, and cannot be used, for the
purpose of avoiding penalties under the
Internal Revenue Code. Contact the Social
Security Administration at 1-800-772-1213
or go to www.ssa.gov to determine the
benefits that may be available to you and
your spouse.
MFS FUND DISTRIBUTORS, INC.
BOSTON, MA
SPONSORED
http://www.ssa.gov
PLANADVISER - Fall 2023

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