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A Paycheck Pays Off

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You may have a clear vision for a deeply satisfying retirement life of social activities, travel, and volunteering. But in most cases, unless you are truly wealthy, you should also have a concrete plan for some type of paid work, especially if you retire earlier than “normal retirement age.” While part-time labor gives retirees of all ages a financial cushion, earned income is essential for those who retire young.

As shown in the graphic below, a 55-year-old retiree who is paid just $10,000 a year for 10 years will increase the chances of his portfolio lasting until age 90 by nearly 10 percentage points, according to a calculation by David Blanchett of Morningstar. This math assumes the man has a $1 million nest egg and withdraws 4% of that the first year; after that, he boosts the dollar amount each year by the rate of inflation.

Notes: Assumes assets are 60% in stocks and 40% in bonds and withdrawals increase each year with inflation. Source: David Blanchett, Morningstar

Part-time income can also help you delay claiming Social Security until age 70, a move that will boost your payout by up to 8% a year. Another consideration: Your Social Security payout is based on your top 35 years of earnings, so you want to have at least that many years of work income.

Source

Retirement Income Working in Retirement
September 20, 2018 Melanie

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