Your new clients, John and Mary Smith, have already plotted out a three-month trip through Asia. Mary has decided to earn a masters degree in Early Chinese Music at a top private college.  At 60, they can’t wait to begin their new lives and come to you asking if they can afford to retire in two years. They’ve diligently put aside 15% of their salaries towards this goal.

You know right away that retiring at 62 is not a good idea, but as a planner, you’d like to deliver good news as well as bad. 

T. Rowe Price has a novel idea: Suggest that they stop saving.

If the Smiths continue working, delay Social Security benefits and allow their savings to grow, they may be able to stop saving, spend money on shorter trips and night classes, and end up more secure in their 70s. “We advocate a ‘practicing retirement’ strategy,” says Christine Fahlund, a senior financial planner for T. Rowe Price. 

The Power of Delaying Social Securiy

Here’s one dramatic way to present the benefit of delaying benefits to clients. A 62-year old who wants about a 30% increase in purchasing power from investments and Social Security as a retiree has three choices: Retire in three years at age 65 by saving 25% of salary a year. Save only 15% of salary and work an additional six months. Or work four years and stop saving.

Another set of scenarios you can offer: Let’s say the Smith earn $1000,000 as a pair and have saved $500,000. If they begin taking Social Security at 62, T. Rowe calculates that they could reasonably expect about $52,000 in retirement income, a big drop from their current income.  At age 70, they’d have a $535,000 nest egg, assuming a 7% return on investments before they retire and 6% afterwards.

If the Smiths work full-time until they both turn 70, even if they stop saving, their yearly income as retirees might be $89,000—more than they were living on, after savings, when they showed up in your office at 60. And their nest egg would be bigger, as much as $784,500.

The middle path—working until age 66—yields a retirement income of about $68,000 and savings of $676,000.

The Smiths could also choose to cut back their hours at work, giving them more time to pursue interests. If they both work part-time until 70, their annual income and nest egg at age 70 could be the same as if they had both worked full-time until then, assuming their savings continue to grow and they don’t take Social Security payments.

Of course, the strategy depends on 7% returns in the next decade. If the markets take a big dip, they would be wise to save more, spend less, or earn more.

It also makes sense to continue contributing to 401(k) plans to take advantage of an employer match and reduce your retirement expenses by paying off a mortgage and other debt.

Many married couples forget to think about their joint life expectancy when considering Social Security. Assuming that at least one spouse will live to 95 is the safest bet, planners say.

“Finding the right time-money balance, as well as the balance between spending and saving while working, will involve tradeoffs,” Ms. Fahlund says. “But a practice retirement strategy is likely to give some investors more financial opportunities to pursue their life-long dreams and enjoy their 60s.”