Consider the Many Benefits of Postponing Retirement
~ By Herb White, CFP, MBA ~
“I can’t wait until I retire!” was the familiar refrain for years, with workers counting down the time until they were able to quit work usually at age 65. Some even chose to take retirement as early as age 62. But lately many people are choosing to wait postponing retirement until after age 65, with an increasing number waiting until age 70 and beyond. If you are facing the question of when to retire, keep in mind that postponing retirement comes with a number of additional benefits that can directly affect your financial future. Let’s take a look.
The first advantage is well-known: Your Social Security payments will increase for each year you delay signing up. For example: workers born in 1965 currently earning $50,000 annually can expect to receive about $1,340 monthly if they begin collecting benefits at age 62. That amount increases to $1,915 per month if they delay claiming until 67, and to $2,374 per month at age 70.
The bigger question to ask first, however, is: when you think about your own retirement, what does it look like? What are your plans? With those questions answered, you then can ask, how will postponing retirement for a few years impact my plans? Having larger Social Security checks to add to your nest egg is a good start. But also factor into your retirement plan other not-so-obvious benefits.
If you plan to postpone retirement, you will likely have routine salary increases because you are working longer. If you were to retire at age 62 or 65, however, you could be missing out on your best earning years.
For many, another factor to consider is that staying on the job means you can continue contributing to your employer-sponsored retirement plan. And if your employer allows you to make catch-up contributions, just a few extra years of saving through your workplace plan could give your retirement nest egg a considerable boost.
In addition to this, delaying retirement may allow you to put off taking distributions until you do hang up your hat. Typically, required minimum distributions (RMDs) are obligatory when you reach age 70-1/2, but your employer may allow you to delay those withdrawals if you work past that age.
Consider this: Did you know that the age you can claim the full amount you are entitled to is in the process of being increased from age 65 to 67? That means you will have to work longer than your parents did to get a comparable level of Social Security benefits.
What about working past age 70? For many individuals with a 401(k) plan who don’t own 5 percent or more of the business, they can continue to delay paying income tax on retirement savings within the 401(k). Typically at age 70-1/2 you need to start paying those taxes. Withdrawals from traditional IRAs, however, will still be required, even if you keep working into your 70s. Roth IRAs, on the other hand, have no distribution requirements during your lifetime.
Have you considered the fact that early retirement usually means having to pay your own expensive health insurance? That’s money that could have been included in your retirement nest egg.
What about new skills you’ll be acquiring? The longer you are on the job, the more likely it is that you will learn new technologies and skills. Retiring at age 62 or even 65 leaves you less prepared for tomorrow’s new technology that can be useful in your daily life or for a part-time job down the road.
Finally, although you can’t quantify this benefit, continuing to work affords a number of intangibles, such as stimulation, interaction with others, and continued goals and challenges.
Does your retirement plan need another look? A good way to ensure you’re on track for the retirement you envision is getting advice from a financial or retirement advisor.
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Provided courtesy of Herb White, MBA, CFP©, a CERTIFIED FINANCIAL PLANNER™ with Life Certain Wealth Strategies, 8400 E Prentice Ave, #715 Greenwood Village, Colorado, www.lifecertain.com, (303) 793-3999. Securities and investment advisory services offered through Woodbury Financial Services, Inc. Member FINRA, SIPC and Registered Investment Advisor. Life Certain Wealth Strategies and Woodbury Financial Services are not affiliated entities.