By Guest commentary Friday, February 14th, 2020

By Chia-Li Chen

My husband has been pushing me for some time to retire early. My answer has always been “no.” Now I have recently published peer-reviewed research to back me up.

I took U.S. government population data, including the Survey of Income and Program Participation from the Census Bureau, and used simulations to measure the success rate of the retiree population. I define retirement success as still having at least a penny left in assets when one dies. I factored the simulation testing with the published survival probability life tables from the Social Security Administration up until age 119. You probably won’t live that long, but like it or not, many of us are going to live much longer than expected, and you don’t want to outlive your money.

From the results I got, it became clear that there are three major misconceptions that can prevent people from having a successful retirement:

You need $1 million to retire. Among the nation’s weighted average retirees, 37 percent of couples’ households and 60 percent of singles’ households will outlive their assets. The higher a household’s net worth, the better chance of having a successful retirement. Of those households with more than $1 million in net worth, 97 percent of couples and 92 percent of singles will make it.

Where you live is a big factor affecting that success, though. California ranked 45th out of 50 states for couples’ households, with 52 percent of having a successful retirement. The state’s singles’ households ranked 31st, with 38 percent passing the simulation tests. In California, $1 million may not be enough. In Iowa, it should be plenty. A household’s spending habits are another important factor that can affect how far $1 million will take you.

You should take Social Security retirement benefits as soon as you qualify. The majority of retirees claimed Social Security retirement benefits before full retirement age. Retirees believed that having Social Security retirement benefits on hand as early as possible is better than losing them if the U.S. government encounters financial instability. However, my study found improvements of 16 percent to the couples’ households and 8 percent of singles’ households in California if they delay claiming until age 70.

A reverse mortgage is a last resort or a scam. Home equity is the largest asset of American families. Both retirees and their financial advisers may not understand that a reverse mortgage is a retirement strategy. The Home Equity Conversion Mortgage is the Federal Housing Administration’s reverse mortgage program that allows qualified retirees to stay in their own home by withdrawing some of the home equity. My study found that it improved 10 percent of the couples’ households and 9 percent of singles’ households in California. In California, 64 percent of couples’ households and 53 percent of singles’ households are eligible for HECM.

My research tested seven different scenarios in various combinations of retirement strategies of delaying claiming Social Security retirement benefits, continuous working and HECM in each of the 50 states. In general, using combined retirement strategies resulted in a higher percentage of the retirees having a successful retirement. Other practical strategies include downsizing by migrating to different states, considering pension payout options, looking into non-traditional partners situations, and immigrants considering retiring to their home country.

Make sure you don’t base your retirement plan on misconceptions. Research strategies and work with a local Certified Financial Planner if you can. Consider using a pro bono service from the Foundation of Financial Planning if necessary. Your goal should be to begin strategically stretching your retirement assets as early as possible in anticipation of enjoying a long, successful retirement.

• Chia-Li Chien has a doctorate in financial and retirement planning and is the director of the financial planning program at California Lutheran University.