By Craig Erwin, Ph.D.
Many people, who had planned to retire, postponed it during the pandemic. It’s hard to retire when you are terrified amid great uncertainty. Today we also have great uncertainty, with high inflation, a bear market on Wall Street, and a brutal recession threatening. The worsening economy will cause many to delay retirement. Of course, many retired earlier than planned during the pandemic because they feared that going to work might kill them.
Although it may not be possible to delay retirement if one is sick or injured, it makes good sense if one can afford to wait. It makes sense because no one knows how long she’ll live. Not many of us expect to live past 90, but many do. If someone lives a decade longer than she expects, retirement could cost her a half million dollars more than she planned. What if she runs out of money years before she dies? New York Life found that just 31% of American adults are confident their retirement savings will be sufficient, so clearly some need to postpone retirement.
Your Social Security benefits rise each year you postpone drawing them (up to age 70), so it helps to delay drawing Social Security, if you can. Delaying retirement five years has numerous benefits. First, the Institute of Economic Affairs found that retirement results in a decline in health for many people, so working longer could improve your health. Second, you will receive significantly higher Social Security payments if you delay retirement. Third, you’ll be retired for five fewer years, so you’ll need less money in retirement. Fourth, your savings will have five more years to grow, boosting your wealth. Fifth, if you delay retirement and keep saving until you retire, you’ll be in much better financial shape when you do retire, which will reduce the chances you’ll run out of money. Finally, if you delay retirement, you will be covered by your employer’s health insurance longer. Taking advantage of the health benefits your employer offers will save you money and delay the need to tap retirement savings to pay healthcare expenses.
Although you may be dying to retire, there are many reasons to work a few years longer, if it’s feasible. It will make your eventual retirement that much sweeter.
When do you plan to retire? Are you confident that you’ll be financially ready? Would you consider postponing retirement? If so, under what circumstances?
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