How you can calculate the impact of retirement

by | Jun 6, 2017 | Larry Kotlikoff

By Laurence Kotlikoff

Originally posted at The Seattle Times, June 2017

We all have to decide when to call it quits. But it’s a very tricky decision. So let me give you a way to make it easy, via the following illustration.

Let’s suppose you hate your job and are thinking of retiring at 65, rather than at 66 as originally planned. Your mind wanders to sleeping late and improving your golf game.

But then doubt sets in. Missing out on one year’s earnings will hurt. On the other hand, there’s taxes. So maybe it won’t hurt that much. But your earnings have never been higher. That extra year of work could mean higher Social Security benefits for decades. Then again, at 65 you can go on Medicare. But, hold on, you’ll need to pay Medicare Part B premiums plus buy a major medical policy. And so on.

Can economics consider all these factors? And can it also help you decide whether to retire early? Yes. MORE