A FINANCIAL planner has confirmed the exact age that a couple around 62 years of age should retire with $1.5 million saved to get the maximum benefits.
CEO of Oak Harvest Financial Group, Troy Sharpe, used the couple’s situation as an example for other Americans considering the best age to retire and when to draw money from Social Security benefits.
“What I’m trying to convey here are the concepts and why planning is important — and how these different aspects are interrelated,” Troye explained to viewers of the example described in a YouTube video.
He explained that all of the recommendations could be applied to single retirees as well, with slight differences.
“The only thing that would be different if you’re single would be the taxation…then of course you’d only have one social security check as opposed to two, but also you’re probably spending less money,” Troy said.
“So, the concepts – if you’re single or married, still valid.”
Troy continued to explain to viewers that the 62-year-old couple was set up with an $85,000-a-year spending limit considering a life expectancy of each at around 90-years-old.
It’s kept at that amount consistently through the end of their lives to account for any long-term care costs that might pop up.
The certified financial planner (CFP) confirmed that with those considerations and that both are now eligible for Social Security benefits at 62, the official retirement outlook is a age of 66 years and 10 months.
Considering the numbers, the couple was in a predicament about when the best time was to be drawing from the Social Security benefits instead of investments.
Troy broke it down into three different possible scenarios.
RETIREMENT AGE & SOCIAL SECURITY
The first saw the couple start taking Social Security benefits immediately at 62 before their official retirement target age at about 67.
Second was predominantly relying on the benefits at the official retirement age, and the third was completely deferring the benefits until 70.
It’s relatively common knowledge when it comes to Social Security benefits that the longer you work or wait to use your payments, the higher they are.
The answer would seemingly be to defer until 70 to have the maximum amount of dispensable cash, but Troy showed viewers that this wasn’t necessarily true.
Considering fluctuations in the stock market and rate of return, taking Social Security benefits at 67 would be best for the 62-year-old couple, according to a graph Troy displayed in the YouTube clip.
Projected numbers showed over $2.8 million in accessible money for the couple, and about $2.3 million by the time they reached 90.
LESS SPENDING
Lowering the spending amount per year didn’t make the outlook change much either.
If the couple used only $60,000 per year, they could at 67 with taking Social Security benefits, see the best returns at around $4.7 million by the time they reached the set life expectancy.
“The big takeaway here is that if you have a smaller spending need relative to your overall portfolio size, when you take Social Security, it doesn’t matter nearly as much as if you have a larger income need relative to your portfolio size,” Troy told viewers.
He added that “optimizing” the timeline and the spending amount is therefore crucial, especially considering those retirees who want to give back to charity, leave money behind for their children, or have other considerations.
The opposite was true if the spending amount was higher than $85,000.
MORE SPENDING
After adjusting the financial outlook to consider spending of $100,000 per year, Troy noted that it’s not as optimal of a situation that some might expect.
“If you turn on Social Security at 62, and you’re getting, let’s say, $40,000, $50,000, a year…your spending need from your portfolio is still around 4%,” he explained.
Even with holding off the benefits until 67, it still put the couple in a dangerous situation of having significantly less cash at $595,000 by 90.
With deferring the benefits until 70, it was even worse at about $284,000.
The rule of thumb is, the less amount of cash the couple needs to set aside for annual spending, the more flexible they can be with when they take Social Security benefits.
Whether they take it at 62, 67, or 70, it wouldn’t make a significant difference to negatively impact their long term financial goals.
Taking it the retirement age of 67, based on an adequate spending amount and other considerations, would be ideal.
With a higher spending amount of $100,000 or more, when to take Social Security benefits would be a vital decision and would likely still fall at an age later than 62.
For more related content, check out The U.S. Sun’s coverage of how an 11-year age gap could hurt a couple looking to retire with $1.3 million.
The U.S. Sun also has the story on why an expert stressed that “retiring early is a mistake,” and suggested a key age to stop working.