Retirement: Taking The Long View

Detroit Free Press personal finance columnist Susan Tompor authored another thoughtful piece in this morning’s paper. Tompor fears, and rightfully so, I think, that folks approaching retirement may be prone to jump the gun this year in response to news of a possible 6%+ hike in Social Security’s cost of living adjustment (COLA). However, unless near-retirees possess substantial resources beyond Social Security on which to draw on through retirement, it likely will behoove them to take the long view and to keep plugging away at work. First, all Social Security beneficiaries, including those already drawing benefits as well as those yet to initiate benefits, will gain from 2022’s likely outsized COLA adjustment. Second, research from Boston University economist Laurence Kotlikoff quoted by Tompor estimates that the inflation-adjusted Social Security benefit at age 70 exceeds the age 62 benefit by 76%. Also, wages likely will continue to climb through the balance of 2021 and into 2022, which should lead to higher paychecks. To the downside, higher 2022 taxes almost certainly will act to deflate the purchasing power of those higher benefits and paychecks.