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Sound Advice: August 4, 2021

Three Questions

When can I retire?  This is by far the most common question and it’s typically asked by folks in their late 50s or early 60s.  The real question is whether the person has sufficient net assets (after outstanding debts are repaid) and an adequate balance between income and expenses to continue enjoying his or her preferred lifestyle.

The answer is straightforward, but requires a fair amount of effort to reach.  The task is that of assembling four groups of information.  These include assets, liabilities, earnings, and expenses.  In other words: what you own, what you owe, what you earn, and what you spend.  The first three are usually simple to identify.  Spending, however, can be a challenge.  Invariably, there are at least two dozen or more categories of regular expenses.  Added to that are unpredictables such as health care, inheritances, relocation, etc.

The upshot of this gathering and evaluation of information will be a result that indicates the likelihood that there will be sufficient resources for future funding.  In the event that there is a substantial possibility of a shortfall, the needed adjustments include options such as delaying retirement, reducing expenses, and increasing returns on investments.

Question Two comes in several forms.  The first is whether to keep the current residence or sell it and rent.  The second is whether to keep the current residence and move elsewhere, perhaps to an area with a lower cost of living.  The third is whether to sell and downsize. 

The answer requires the same approach as that for Question Number One.  Each case requires a comparison of outcomes between the possibilities. That’s especially so in view of the usually disproportionate importance of residence values for most families.  All of the information needed to answer Question One is needed to answer Question Two. 

Question Three: When should I start taking Social Security?  The answer is equally complex.  Assuming the potential recipient has made a sufficient number of contributions to qualify (usually 40 calendar quarters), there are three main choices.  The first is “taking early” at 62 years of age.  The next is at full retirement age, which varies by date of birth, but tends to be about 67 years of age.  The third is at 70 years of age.  In all cases, it’s not cut and dried.

Taking early at 62, for example, comes with several caveats. One is that benefits are reduced by 30% from those that would be received at full retirement age.  Another is that benefits may be reduced if the recipient continues to work.  Plus, when the recipient stops working, the benefits stay the same.  From a long-term standpoint, this is rarely a good choice.

Taking at full retirement age is a better choice.  There is no reduction of benefits and there is no penalty for continuing to earn income. 

An even better choice for those with good life expectancy is waiting for benefits to start after full retirement age, perhaps as late as 70.  For each year of postponement, benefits will increase by 8%, but the delay can be as little as one month or as long as three years.  The increase is always proportionate.

There are other variations as well, such as spousal benefits, which may involve a comparison of what the spouse would have received based on his or her own contributions with what would be received based on a percentage of the other spouse’s benefits.  Even if the spouses are no longer married, spousal benefits may still be available.

In all cases, the answers to all of these kinds of questions involve an evaluation of relevant information.         

N. Russell Wayne, CFP®

Any questions? Please contact me at


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