John M. Hoffman & Associates CPAs

Favorite Tax Planning Ideas

Defer Retirement (This could be THE solution)

With the 2008 collapse of the economy and stock market:

All of these factors leave the average worker (particular baby boomers) with retirement prospects looking less rosy and a little towards the bleak side as compared to prior to 2008. 

With that in mind, the idea of deferring retirement might be the best viable solution. If you have been saving for retirement for 30 years and were planning to retire at age 65, think about what happens when you postpone that for two years:

Let’s say that at age 65 you have $1,000,000 in your retirement savings. An annuity paid over your life expectancy of 21 years at a 4% annuity rate would yield $71,280 per year. Social security benefits would be approximately $20,000 per year. This would mean that your retirement benefits would total $91,280 per year and only the social security would adjust for inflation.

If you worked two more years and added $15,000 per year to your retirement savings and such savings grew by 4% per year, without compounding that would add $110,000 to the account, now totaling $1,110,000. The annuity payout at age 67 assuming a 4% growth rate and a life expectancy of 19.4 years would be $83,342 per year. Social security benefits would increase by approximately 12% to $24,000 and your total retirement income would be $107,342 per year, an increase of 17.5%. 

These amounts are hypothetical but the illustration shows the compound effect of everything working in your favor as an option to solve the problem from the meltdown of the retirement and all other savings that most of us have experienced.  

In order to defer retirement, I suggest that you “Love Your Job”!