Click here to learn more about our financial professionals by visiting FINRA's BrokerCheck.


Step 3: Consider A Hybrid Retirement

| November 15, 2018
Share |

Not everyone wants to retire early and for some individuals an early retirement may pose certain economic challenges. For these situations a hybrid retirement strategy may be a better solution. A hybrid retirement strategy involves either postponing retirement for a few years or working part time to allow their assets to grow and increase their lifetime Social Security benefits.

A 2006 study by the Urban Institute published an article titled Working for a Good Retirement which found that there are great economic benefits to retiring at certain ages over others.

Key findings from the publication Working for a Good Retirement1 include the following:

Workers could increase their annual income by an average of 5 percent from age 50 onward for one additional year of work and 25 percent for five additional years of work. The additional net wealth from one more year of work, if annuitized at retirement, could increase consumption by 9 percent per year. Five additional years of work could increase annual consumption at retirement by 56 percent per year.

When people work longer, they earn more income, usually save some of that income, allow existing assets to grow, increase their lifetime Social Security benefits, and increase their annual Social Security benefit even more when their lifetime benefits are withdrawn over a shorter period of time. Butrica et al. (2004) estimate that people could increase their annual consumption at older ages by more than 25 percent by simply retiring at age 67 instead of age 62.

The authors also find that older individuals could substantially increase their financial resources in retirement by working longer. For example, the representative worker could nearly double his real annual income at age 75, net of health insurance premiums and federal taxes, by stopping work at age 65 instead of age 55. By waiting until age 68 to retire, he would accumulate enough wealth (from pensions, Social Security, and saved earnings) to finance an annual consumption stream at older ages of $60,000 per year, nearly three times as much as he could finance if he retired at age 55.

You can read the full article here.

Butrica BA, Smith KE, Steuerle CE. Working for a Good Retirement. SSRN Electronic Journal. May 2006. doi:10.2139/ssrn.920832.

Share |