Retiring At Age 70 Can Change How Much You Need In Retirement Savings

A lot of attention goes to what states or countries to retire in and how much you might need to live the rest of your life comfortably, but an equally decisive factor here is when you retire. Your retirement age determines how many years you'll need to fund without a salary and how much Social Security you'll qualify for. The later you retire, the less savings you'll need and the more benefits you receive.

When considering retirement age, there are three benchmark ages experts typically refer to: 62, 67, and 70. The minimum retirement age to qualify for Social Security is 62. This is the age at which the government starts giving you support, so it's a nice age to stop at if you're tired of working and you have enough money saved up. However, this does mean you'll permanently receive less Social Security benefits for retiring early. For most people born after 1960, 67 is usually the full retirement age (FRA), and that means you'll receive your full benefit. Lastly, retiring at 70 gives you three more years of salaried income, additional time to save, and higher monthly Social Security benefits for life.

It might seem like only an extra three years from the FRA, but those three years could make a big difference. This is especially true if you plan to retire somewhere more expensive, like New York City; hypothetically, this could mean $70,000 each year for three extra years, for a total of $210,000. That means your savings could be reduced by nearly a quarter million in just three years, not including the Social Security boost.

One of the biggest advantages to retiring late is that you lock in higher Social Security benefits for life. For people born in 1960 or later (full retirement at 67), claiming at 62 permanently reduces benefits by about 30%, because you wouldn't have worked enough years to receive full Social Security. Waiting until 70, though, raises benefits to 124% of your full retirement amount thanks to delayed retirement credits of roughly 8% per year. After 70, no further increases apply, making this the ceiling.

Consider the math: If your full retirement benefit at 67 is $2,000 per month, taking it at 62 would shrink it to around $1,400 per month. Waiting until 70, on the other hand, raises it to about $2,480 per month. That's an extra $1,000, every month, for life — and future cost-of-living increases are adjusted for inflation on this higher base.

The effect on savings is also similar. If you expect to spend $60,000 a year in retirement with the same Social Security benefits above, claiming at 62 would force your savings to cover about $43,200 per year. Which means that under the 4% yearly withdrawal rule, you should have a nest egg of about $1.08 million. Claiming at 70 cuts that gap to $30,240 per year, lowering the savings requirement to around $756,000. In this scenario, delaying reduces the nest egg needed by $325,000 — a massive difference. In fact, you can live off of just those Social Security checks comfortably for the rest of your life in some states.