When should you retire? If you ask ten seniors that question you’re likely to get at least ten different answers – maybe more. Deciding when to hang up the tool belt or the briefcase is one of the most individual, personal decisions we’ll ever make. We can’t count the times when a guest at a LifePlanning Seminar or a caller to our AgingOptions radio program has described their situation and then asked the question – “So, when can I stop working?”
Several weeks ago this article appeared on the popular Money website of CNN. Written by a reporter named Christy Bieber, it’s called “5 Benefits of Delaying Retirement.” According to Bieber, only about half of all working Americans report that they’re looking forward to retirement – yet half of us “quit working for good between ages 61 and 65.” Many workers retire because they have to, due to layoffs and a tight job market for older workers, while others leave the workforce for health reasons. “But many others are lucky enough to have the option of retiring when they’re ready, and on their own terms,” Bieber writes. “Even if you can hardly wait for the day when you leave work forever, it’s important to be strategic about when you retire so you don’t spend your post-work life worrying about whether your money will run out.”
So before you make the decision that it’s time to retire, we suggest you consider these five reasons why waiting might be the best idea, provided you have the choice. As tempting as it may seem to enter the so-called carefree period of retirement, this is one decision where delayed gratification can pay off, and not just financially. In fact, in our opinion the CNN Money article does tend to focus a bit too much on financial reasons why continuing to work makes sense: three of the five reasons have to do with money. Here at AgingOptions we always remind our clients and listeners that having plenty of money in retirement is not enough to guarantee you’ll be able to live the way you want to live as you age. More on that in a moment.
So why keep working? CNN Money says the first reason is that you’ll have more time to save. This works in two ways. First, as a worker over 50 you are allowed to set more money aside in your retirement accounts: up to $24,000 in your 401(k) and up to $6,500 in your IRA. Second, the savings you already have set aside will have had more time for the interest to compound. CNN Money gives this example: if you have a $350,000 nest egg earning 6% interest, waiting one extra year – even if you don’t contribute any more of your own income – boosts your savings by $21,000. If you wait five years, the difference is astounding: your $350,000 nest egg will have grown to almost $470,000. This is one clear example where waiting pays dividends.
Two more of the benefits of delay in the CNN Money piece are closely linked (and also deal with your wallet). Waiting to retire allows you to delay taking Social Security, which is something we recommend in most cases. Most of our readers and listeners have heard this before, but assuming your full retirement age is 66 (which is the case for those born between 1943 and 1954), your benefit grows 8 percent for every year you delay benefits from age 66 to age 70. There are circumstances in which we would advise taking benefits earlier, but if you’re in good health and can afford to delay until 70, we think most of you will be glad you did. The other fiscal benefit has to do with employee pension plans: the longer you work, the more you can contribute to your defined-benefit plan, and the greater your payout may eventually be.
(If you’re serious about evaluating your retirement finances, there are some helpful online resources you can use to build your own “retirement dashboard.” AARP is often a good source of helpful tools, and you can click on this link to go to the AARP Retirement Calculator. Another good resource, found here, is the financial planning calculator from US News.)
When we talk about workers remaining on the job longer and delaying retirement, one of the benefits we hear about over and over again is the ability to remain on your employer’s health care plan. According to CNN Money, the average monthly health-insurance premiums for people between 55 and 64 last year came to about $580 per person. While it’s true that the Affordable Care Act (also known as Obamacare) may provide subsidies for some older insurance buyers, the future of that law is uncertain. “Giving up your employer-provided healthcare benefits could cost you thousands, and you might have to switch doctors, which could be an issue if you or your spouse has any chronic health conditions,” says CNN Money.
In other words, keeping your employee medical is a powerful incentive to stay on the job.
The final point in the CNN Money article may be one of the most important. The longer you keep working, the more your mind stays active and healthy. Research has shown that working keeps you physically healthier (one study indicated that mortality rates drop 11 percent for every year a worker stays on the job after 65). What’s more, keeping your mind active and engaged with the give and take of the workplace helps preserve mental acuity and is believed to help stave off dementia. Staying on the job also provides a psychological boost, preserving a sense of identity that retirees can sometimes lose when they leave their work lives behind
The CNN Money article ends with this: “Before you decide to retire, make sure your financial life is in order and that you have a plan for how to stay healthy, active, and connected to your community. If you’re not quite ready yet, why not wait?” This strikes us as good advice. At AgingOptions our approach to retirement planning takes all the key facets into account: not just finances, but also the other aspects that have to be part of a strong plan. What about your housing options – have you considered where and how you want to live so you won’t become a burden to your loved ones? Have you planned ahead so that your medical needs will be met? Are all your legal affairs in order, and your family fully informed about your wishes? The way to make sure the answer to all these is a confident “yes” is to work with us to develop your own AgingOptions LifePlan. It will be your blueprint to help you build the retirement of your dreams.
Find out more by investing a few hours attending a free AgingOptions LifePlanning Seminar at a location near you. You’ll be very glad you did! For dates, times and locations, click here. You can register online or call us during the week for assistance. Bring your questions! We’ll look forward to meeting you.
(originally reported at www.money.cnn.com)
