Retiring at 70 Could Significantly Lower the Savings You Need

Retirement planning often focuses on where you will live and how much money you need to support yourself, but the age you leave the workforce can be just as important. Your retirement age affects how many years you must cover without a paycheck and how much Social Security you can collect. In general, the longer you wait, the less savings you may need and the larger your monthly benefit may be.

Experts often point to three key retirement ages: 62, 67, and 70. Age 62 is the earliest point at which you can begin claiming Social Security, which can be appealing if you are ready to stop working and have enough money set aside. The tradeoff is that filing early permanently reduces your benefit. For most people born after 1960, 67 is the full retirement age, when you are entitled to your full Social Security check. Waiting until 70 provides three more years of earnings, more time to save, and a larger monthly benefit for life.

Those extra three years may sound minor, but they can have a major financial impact. That is especially true if you want to retire in a high-cost place such as New York City. In that case, three additional years of $70,000 annual income would add up to $210,000, which could sharply reduce the amount you need to draw from savings, even before considering the larger Social Security payment.

How the age you claim changes your Social Security benefit

One of the biggest benefits of delaying retirement is securing a higher Social Security check for the rest of your life. For people born in 1960 or later, claiming at 62 can cut benefits by about 30% because you have not reached full retirement age. By contrast, waiting until 70 increases the benefit to 124% of the full amount, thanks to delayed retirement credits of about 8% a year. After 70, there are no additional increases, so that is the maximum.

Here is an example: if your full retirement benefit at 67 would be $2,000 per month, claiming at 62 would lower it to about $1,400. Waiting until 70 would raise it to roughly $2,480 per month. That means about $1,000 more each month for life, with future cost-of-living adjustments applied to that higher base.

The same logic applies to your savings needs. If you expect to spend $60,000 a year in retirement and receive the same Social Security benefit described above, claiming at 62 would leave about $43,200 a year for your savings to cover. Using the 4% withdrawal rule, that would call for a nest egg of roughly $1.08 million. Claiming at 70 reduces the amount your savings must cover to $30,240 a year, bringing the required nest egg down to about $756,000. In this example, delaying retirement lowers the needed savings by $325,000. In some states, those Social Security checks alone could cover a comfortable retirement.