Experts on aging have long noted that for healthy people who enjoy their jobs, retiring too early, may not be such a great idea, with studies showing earlier mortality rates and more health problems among those who retire than those who keep working.
Even though today's new retirees tend to be significantly healthier and more active than their parents were, trading an interesting and intellectually stimulating or creative job for a life of TV, cards and golf may not be best for everyone.
There are also financial bonuses that come with working past 70. Besides still earning and saving instead of tapping retirement funds, those who work past the current "full retirement age" of 66 and wait until 70 to retire, see an 8% benefit boost for each of those last four years. But even if someone waits until 70 to file, if he or she then keeps on working at current or higher pay, (as might be the case for professionals like lawyers, doctors, dentists, professors or accountants, for example), they’ll keep getting a higher benefit payment each year they work.
This is because the Social Security Administration re-calculates benefits every year based upon a retiree's 35 highest-earning years. If after 70, your client is still earning near her or his highest level, each of those post-retirement years of earnings will replace earlier low-earning years.
The benefit increase, while not as dramatic as what one gets for waiting from 62 until 66 or until 70 to retire, can still be significant -- about a 9-10% boost in benefits for working past 70 until 75 and 17-20% for working until 80, assuming pay remains flat (more if the person gets raises) for those who’s benefit level is low to begin with – less for those earning a higher benefit amount.
Rob Korn, head of retirement education at Blackrock, notes that those higher benefits earned are worth even more, dollar for dollar, than money drawn from a 401(k) or IRA, "because only 85% of the Social Security benefit is taxable."
Meanwhile, those who haven't retired and still work at the job that sponsors their retirement plan may be exempt from the requirement to start mandatory withdrawals at 70 from their 401(k) or 403(b) fund (unless they own more than 5% of the employer/plan sponsor).
Dave Lindorff spent five years as a China correspondent for Businessweek, and has written for The Nation and Salon.com.
This story is part of a 30-day series on Social Security and retirement income strategies.