For example, a couple with $75,000 in joint household income who want to retire at 62 and have 75 percent of their preretirement income would need $975,000 in savings by age 60. But if they're willing to keep working until age 67, T. Rowe Price estimates they'd need $675,000. Those five extra years on the job cut the amount needed at age 60 by almost one-third. And if the couple don't touch their savings until 70, they need to set aside an even lower amount — $525,000. Hello, mission possible.
One assumption is critical: This model assumes your portfolio will earn 7 percent before you retire and 6 percent in retirement
. That might seem too optimistic. To build in a margin of safety, you could assume a 5 percent preretirement return and 4 percent afterward. (By comparison, AARP's financial-planning tool assumes a 6 percent return preretirement, 3.6 percent afterward.) If the more cautious assumption proves accurate, you'd need to work one more year than you anticipated. But even that scenario is probably more affordable than you guessed. That's because the key ingredient in the recipe isn't the rate of return. It's your intention to keep working. "The investment earnings on your contributions at this later stage are less important," says Sass. "The value is that you have a job that supports you and helps you preserve your retirement security by not beginning to draw down your savings. We're talking about a few extra years of working to secure your finances