Making Up For Lost Time: Delaying Retirement

An Example

This example shows just how meaningful this strategy can be for people facing a serious shortfall at retirement time.

Mary and John, a couple in their 60s, have an annual gross income of $77,000. They need to generate $46,900 in after-tax retirement income annually to replace 80% of current earnings.


The Numbers

They can expect $20,100 in combined Social Security benefits.

They need sufficient savings --$510,800 to purchase an annuity to fill the gap of $26,800 annual income.

They have only saved about half this much ($255,400) and they are both age 62.


What Can They Do?

  • Mary and John can work four more years, until age 66.
  • They can save 10% of their net income each year.
  • Achieve a return of 3% above inflation on all their savings, and meet their goals by age 66.

The gap is made up through increased Social Security benefits, additional savings, interest on savings and the annuity cost will be less for fewer years in retirement.

Even more dramatically, if Mary and John had only saved $51,000 of the $510,000 they need, they can fill the gap by working until age 70, saving 10% of net income each year and achieving a return rate of 3% above inflation on all savings.

If you, like millions of baby boomers, are facing the realization that you have not saved enough to retire at normal retirement age - don’t despair. If you continue working a few years beyond your normal retirement age and increase your savings, you can substantially improve your retirement outlook.

A recent analysis by a federal agency, the Congressional Budget Office (CBO) points out that delaying retirement by even a few years can substantially improve the financial outlook for those who have a savings shortfall.

According to the CBO, working a few years longer while also saving more income has several important effects:

  • It shortens the number of years of retirement and reduces the total funds you will need.
  • It allows funds already invested to continue to grow and gain in value.
  • Delaying Social Security benefits increases the benefit amount if the worker is earning substantially more than in previous years because the Social Security benefit amounts are based on the highest 35 years of wages.


Also, by delaying Social Security benefits, there is an increase in the overall benefit amount, making a big difference for moderate earners.

The oldest boomers will be able to collect:

  • 75% of normal benefits at age 62.
  • 100% or the full benefit if they wait until age 66.
  • 132% or the full benefit plus an extra one-third if they wait until age 70.

For more information, find a summary of the CBO report on the internet at


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