Retirement Reform Blog

A recent New York Times article discusses whether the best time to retire is at 62 (early retirement) or at 70.  Its conclusion: hold out as long as you can.  This must, however, be taken with a grain of salt.  Getting the timing of retirement right depends on several factors, and no two families are exactly alike.

For a single person, probably the most important question is how long do you plan to live?  If you are "in poor health and probably won't live past 78," you might want to take benefits at early retirement, says the Times.  Ideally, if you expect to live a long time and can work past retirement, then 70 is the best time to take benefits.  

If long life is the expectation, but you can't work till 70, then 66 seems to be the magic number.  This option is best even if a retiree has to use retirement savings to make it to 66 to file for Social Security benefits.  That's because the increase in benefits gained by retiring at 66 instead of 62, eventually makes up for the savings used to make it to 66.  Waiting any longer than 66, seems to exhaust savings too much to make up for higher Social Security benefits.

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Do you want to pay the piper now, or later?  Currently, only households making less than $100,000 a year or spouses filing jointly can convert their traditional Individual Retirement Account (IRA) into a Roth IRA.  But as noted in a recent Wall Street Journal article those restrictions will be lifted in 2010, so that workers of any income level can convert their traditional accounts to a Roth.  Traditional IRAs allow workers to save money tax free now and pay taxes when they withdraw their money during retirement.  Roth IRAs, on the other hand, allow workers to pay taxes on retirement savings now and withdraw it tax free later.   If you're not sure whether a Roth IRA is right for you, check out the NCPA publications "To Roth or Not" and "Would You Benefit from a Roth IRA?"