Retirement is complicated.

The retiree-to-be has many critical decisions to make despite deep shrouds of uncertainty, including your future health and life expectancy.

Here are just a few of the choices near-retirees confront: When to retire; whether to shift to part-time work; when to draw down assets; how much money to withdraw annually from retirement savings; whether to annuitize savings, and when to claim Social Security. 

Many people are largely on their own figuring out how to navigate their path to retirement. Brigitte Madrian, dean of the BYU Marriott School of Business has noted that many experts routinely assume people are rational planners. They are logical in their approach to retirement, much like Mr. Spock of Star Trek fame. Instead, Madrian observed, most of us are much more like Homer Simpson: overwhelmed by the demands of everyday life.

Social Security is a good proxy for the complexity of retirement. Experts in Social Security rightly emphasize the financial wisdom in claiming Social Security later rather than earlier. The benefit is more than 75 percent higher if filed at age 70 vs. 62.

A set of calculations by economists John Shoven, Gopi Shah Goda, and Sita N. Slavov illustrate the gains from delay. The scholars calculated that the optimal age for a single woman born in 1951 to claim Social Security is 70. Her expected income is almost 18 percent greater than if she had claimed at 62. For a man born in 1951, the comparable numbers are age 69 and a 13 percent increase in expected income. For two-income couples, the target age to claim is 70 for the primary earner born in 1951 and age 67 for the secondary earner born in 1953. The gain in income is estimated at 17 percent.

For most people, delaying taking Social Security means earning an income well into the traditional retirement years. Yet the “delay filing” mantra isn’t the right choice or practical decision for everyone. For example, someone in poor health with dim prospects for living a long life might do well to file at age 62. The same goes for a worker laid off in their early 60s and unable to find employment.

So, take your time if the prospect of retirement is coming closer. Think long about what you want out of the last third of life. A different job and career? A mix of work, grandparenting and volunteer activities? Travel? Even if most of us are Homer Simpsons, pursuing the “why” of what we want out of the next stage of life will help answer some of the complicated “how” questions.


Chris Farrell is senior economics contributor, “Marketplace,” commentator, Minnesota Public Radio.