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Business // Thinking Smart
David S. Chang

America’s Retirement Crisis Part II

Last week we covered Part I of dealing with America’s Retirement Crisis. With the aftermath of The Great Recession, life expectancy increasing, costs rising and underestimating post-retirement living expenses, there is no doubt that we have a retirement crisis at hand. The next two weeks we will cover strategies to help ensure that your assets last as long as you need them.

Consider postponing retirement or starting a second career. More Americans are delaying retirement so they can increase their retirement savings, take advantage of health insurance coverage, allow their investments to recover value or wait for a spouse to retire. Many also are not ready to give up a fulfilling career. Some who are ready to retire start a second career or take on part-time work. In addition to making some extra money, many retirees enjoy the camaraderie or want to stay active and productive while still having plenty of time for family, hobbies or travel.

According to a recent survey by the MetLife Foundation, 8.4 million Americans between ages 44 and 70 already have launched “encore careers,” or jobs that combine income with a hobby, passion or social impact. Among those surveyed who were not working a second career, nearly half are interested in finding meaningful work. More than 80 percent of the respondents said they got a “tremendous amount” or “quite a bit” of fulfillment and satisfaction from their encore careers. More studies show that Americans are reinventing retirement and viewing it more as a phase of rejuvenation and recreation than as a period of complete rest.

Delay taking Social Security benefits. One of the most important decisions facing a retiring worker is when to start taking Social Security. There are some benefits to delaying the benefits. Normal Retirement Age (full retirement age or NRA) is when you’re eligible to receive full benefits. It used to be 65, but current laws state that for those born after 1938, normal retirement age is some point between 65 and 67. When to start taking benefits depends on a retiree’s individual circumstances, but here are some reasons you may want to wait:

* Delaying Social Security means you get increased benefits each year, reducing your risk of running out of money later in life. If you start taking benefits after your NRA at age 70, you will typically get a credit. For example, if you were born in 1944, your NRA is 66. However, if you decide to take your benefits at age 68, waiting the extra two years you could get a credit of 8 percent per year. That means your monthly benefit check will be 16 percent higher than what you would have received at age 66.

* Each future cost of living adjustment (COLA) may be bigger. Social Security benefits increase each year to keep up with inflation. Your COLA typically could increase by a percentage of the current payout each year, meaning that delaying your benefits may give each adjustment a higher dollar value. Work with a professional who understands your financial situation. You also can visit artofthinkingsmart.com under “smart finance” for more information and resources on Social Security.

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