In Favre's Favor: Delayed Retirement

Brett Arends

Updated Jan. 26, 2010 8:10 p.m. ET

Maybe we should all take a leaf out of Brett Favre's playbook.

Not the last-minute interception: The delayed retirement.

The veteran 40-year-old quarterback just led the Minnesota Vikings to the conference playoffs–and within a whisker of the Superbowl–at an age when most of his peers have either faded to minor teams or hung up their cleats altogether.

Mr. Favre first toyed with retirement two years ago, before choosing to stay in the game. He's now halfway through a two-year deal with the Vikings and is reconsidering whether to come back next season, following Sunday's pounding by the New Orleans Saints when he limped off the field with bruises, cuts and a sprained ankle.

But with Brett Favre, who knows?

He may represent the past of the NFL, but he's the future of the workforce.

For several decades, starting in the 1960s, an early retirement became an entitlement–even as people lived longer.

That is so over.

From 1960 through 2008, U.S. life expectancy rose to 78 from 70 according to the World Bank. Yet during that time the average age at which people start taking Social Security dropped by around four years to 63. No wonder so many pension systems are in financial difficulty. The math doesn't add up.

Last year it got even worse. Waves of older workers got laid off in the economic crisis. Lots signed up to take Social Security at the earliest age possible, 62.

Some had to.

But others retired early by choice. Unless they were very well off, or they had particular circumstances, they were making a terrible financial choice.

For many people, taking early Social Security is going to cause them real financial hardship, because the earlier you take it the less you get each month. The worst effects won't be felt at 63, when they probably have savings to tap if necessary. The real trouble comes when people are in their eighties or nineties. By that time, for many, the savings will be long gone.

ENLARGE

Minnesota Vikings quarterback Brett Favre walks off the field after his team's 31-28 loss in overtime to the New Orleans Saints in the NFC Championship this past Sunday. Associated Press

Many people have saved too little for their retirement. They've underestimated how much they're going to need in income each year, how long they are going to need it and how much they will need saved up to generate that income. According to the Employee Benefit Research Institute, less than half of workers have saved more than $25,000 for their retirement. (To give you an illustration of what that means: if your savings earn, say, 3% a year over inflation once you are retired, a savings account of $20,000 will provide you with an income of just $1,000 a year, adjusted for inflation, for 30 years).

Delaying retirement is one of the strongest financial levers anyone can pull.

It's a double win for your savings. You get extra years to save up. And meanwhile the savings have to last less time once you retire.

But the biggest gain comes through Social Security. Right now the earliest you can take payments is age 62. You get extra credits for delaying all the way up until age 70.

Consider someone born in the same year as Brett Favre, 1969, but who earns a more typical salary of maybe $40,000 a year.

If he retires as soon as he turns 62, in 2031, and if we ignore spousal benefits, the worker can probably expect to collect a monthly benefit of $1,010.

If he delays that until 2036, when he turns 67, the monthly payout will rise to $1,472.

And if he waits till 2039, when he turns 70, he'll get $1,846. That's an 83% jump from the payout he'd earn if he quit at 62. (You can run the numbers yourself at the Social Security Administration Web site, which includes a simple quick calculator.)

Obviously, Mr. Favre shouldn't have to worry about his finances. But he can help his fellow citizens by passing the message along about staying in the game as long as you can.

Write to Brett Arends at brett.arends@wsj.com