Planning Briefs

Warning About Choosing Age For Retirement

Published Wednesday, September 16, 2015 at: 7:00 AM EDT

If you're thinking about retirement, here's a key question: What is the best age to leave the workforce in order to maximize your Social Security benefits? You'll hear many opinions about what age is the best to retire. If you choose early retirement at age 62, you'll get a monthly benefit which is 25% less than you would get at full retirement age, 67 for most people today. If you wait until age 70, you'll get 132% of your full retirement age benefit. But on the other hand, you'll have fewer years to collect those benefits, which are an important part of the retirement income of many people.

A lot of people today are choosing 62 to retire because they are still able to enjoy an active lifestyle at that age. But it can be a big mistake to choose early retirement based on how long people in your family have tended to live.

The writer of this article chose early retirement because his father died at age 39, his mother at 65, his older brother at 67, and two uncles in their 40s. He calculated that he would have to live to 76 ½ in order to get the same amount that he would get at his full retirement age, 65. He's now 84 and getting much less money.

This article was written by a professional financial journalist for Preferred NY Financial Group,LLC and is not intended as legal or investment advice.

An individual retirement account (IRA) allows individuals to direct pretax incom, up to specific annual limits, toward retirements that can grow tax-deferred (no capital gains or dividend income is taxed). Individual taxpayers are allowed to contribute 100% of compensation up to a specified maximum dollar amount to their Tranditional IRA. Contributions to the Tranditional IRA may be tax-deductible depending on the taxpayer's income, tax-filling status and other factors. Taxed must be paid upon withdrawal of any deducted contributions plus earnings and on the earnings from your non-deducted contributions. Prior to age 59%, distributions may be taken for certain reasons without incurring a 10 percent penalty on earnings. None of the information in this document should be considered tax or legal advice. Please consult with your legal or tax advisor for more information concerning your individual situation.

Contributions to a Roth IRA are not tax deductible and these is no mandatory distribution age. All earnings and principal are tax free if rules and regulations are followed. Eligibility for a Roth account depends on income. Principal contributions can be withdrawn any time without penalty (subject to some minimal conditions).