7 Benefits of Delaying Retirement, Finance Experts Say
Prolonging your career could come with major benefits.
Deciding whether or not you're ready to retire can put you at a crossroads—one that can affect the rest of your life's trajectory. While retirement can't come soon enough for some people, others find that delaying retirement comes with benefits that are too big to ignore. Though not all of those benefits are monetary, many are. Experts say that working for longer can help you secure the retirement of your dreams and shield you from financial risk.
"One of the biggest risks retirees are going to face is longevity risk—the risk of outliving our assets," says Melissa Murphy Pavone, CFP, CDFA, director of investments for Oppenheimer & Co.
"With the advances in medicine and technology, people are living longer. One out of four 65-year-old men of average health will live to age 93. One out of four 65-year-old women will live to age 96. We need to plan for a longer retirement period. The more you save and the earlier you save, the better," she says.
Considering retirement for yourself? Don't quit your day job before finding out what you stand to gain by sticking with it for even a little while longer.
RELATED: 6 Ways to Earn Passive Income During Retirement, Finance Experts Say.
1
You can increase savings and employee retirement funds.
One of the main benefits of delaying retirement is increasing savings and retirement funds, says Michael Collins, CFA, founder and CEO of WinCap Financial. "By working longer, individuals have more time to contribute to their retirement accounts and build a larger nest egg, ultimately providing them with more financial security in their golden years," he notes.
Pavone says that while starting earlier is better, it's never too late to begin saving for retirement. "If your company has a retirement account, enroll. If they don't, open an Individual Retirement Account, or IRA. By maxing out your retirement contributions, you are building a solid financial foundation for your future," she shares.
If you're over the age of 50, she recommends utilizing catch-up contribution programs. "Not only will this boost retirement savings but it could possibly be tax advantageous," she explains. "If your company offers a company match, make sure you take advantage of it."
Delaying retirement will also allow your pension plan to grow if you have one. "This is because pensions are typically based on years of service and average salary, both of which can increase with additional years in the workforce," Collins says.
2
You may receive more in Social Security.
Delaying retirement also means delaying the start of social security benefits. Though most people are eligible to file a claim beginning at age 62, this will result in reduced benefits compared to waiting until full retirement age (FRA). The benefits only grow if you wait longer than that.
"For every year beyond full retirement age that an individual delays claiming Social Security, their benefit increases by eight percent, up until the age of 70," Collins says.
However, Pavone notes that deciding when to take Social Security is a personal decision. "There is no one-size-fits-all answer for how or when to turn on Social Security retirement benefits," she says. "There are many factors to consider: desired retirement age, expected lifespan, lifestyle goals, anticipated expenses, just to name a few."
RELATED: Retiring on a Middle-Class Income? Don't Make These 9 Mistakes, Experts Say.
3
You'll extend your current health insurance coverage.
After you retire, you'll need to replace your current coverage with Medicare or purchase private insurance.
"Many individuals rely on employer-sponsored health insurance for their medical needs," points out Collins. "By delaying retirement, they can continue to receive this coverage and avoid the often steep costs associated with private health insurance."
Doug Roller, founder of Crossroads Financial Group, notes that continued health care isn't the only way that a longer career can improve health outcomes. "Research has shown that staying engaged in the workforce can have positive effects on physical and mental health. Working longer may provide a sense of purpose, social interaction, and mental stimulation, which are beneficial for overall well-being in retirement," he tells Best Life.
4
You'll have more time to pay off debts.
Transitioning to a fixed retirement income can be a much simpler process if you've paid down your outstanding debts, such as mortgages, car loans, or credit card debt. "This can reduce monthly expenses and provide a more secure financial situation in retirement," says Collins.
If you feel you'd rather not retire until those debts are cleared, you can set financial goals that will support more financial freedom in your senior years. For instance, you can work to pay off your mortgage faster or sell a vehicle that you no longer use as often to enter retirement debt-free or less heavily burdened.
5
You'll prolong the mental and social stimulation that comes with working.
Before you quit your job, it's also important to consider the emotional implications of retirement.
"Retirement can be a major life change, and some individuals may find it difficult to adjust to suddenly having a lot of free time," says Collins. "By delaying retirement, individuals can continue to engage in mentally and socially stimulating activities through their work, which can improve overall well-being and quality of life."
He says that many people find purpose and fulfillment in their work, so putting off retirement allows them to prolong this sense of accomplishment and contribution to society. "It can also provide a sense of structure and routine, which can be beneficial for mental and emotional health," Collins adds.
RELATED: 10 Things You Should Stop Buying When You Retire, Finance Experts Say.
6
You can delay your Required Minimum Distributions (RMDs).
For people with traditional retirement accounts, delaying retirement means delaying the start of required minimum distributions (RMDs) at age 72, Collin says.
However, according to the Internal Revenue Service (IRS), "account owners in a workplace retirement plan (for example, 401(k) or profit-sharing plan) can delay taking their RMDs until the year they retire, unless they're a five percent owner of the business sponsoring the plan."
"This can help to minimize tax liabilities and allow the retirement account to continue growing," Collins notes.
7
You may be more sure of your decision.
Once you leave your career, it can be difficult to re-enter the workforce should you change your mind. By delaying your retirement, you can be absolutely sure that you're ready to make the transition on your own terms.
"Delaying retirement gives individuals more time to consider their options and make a well-informed decision about when to retire," says Collins. "This can help to ensure a more financially secure and fulfilling retirement."
Best Life offers the most up-to-date financial information from top experts and the latest news and research, but our content is not meant to be a substitute for professional guidance. When it comes to the money you're spending, saving, or investing, always consult your financial advisor directly.
