The unexpected benefits of retiring later than planned

What is the ideal age to retire? Of course, there is no perfect answer to this question. While many people have a goal of retiring relatively early, fewer people say they “want to work longer than necessary.”

However, there may be some good reasons to work a few more years, especially when it comes to financial security in retirement. Here are three factors to keep in mind when deciding what retirement age is best for you:

1. Social Security could be (much) higher.

Some people retire with a pension, but the reality is that for many retirees, Social Security will be their only source of retirement income that is protected from inflation. Therefore, maximizing your Social Security cash flow may be a smart idea.

According to the latest information (April 2024), the average retired worker receives Social Security benefits of $1,915 per month. That’s just $23,000 per year.

But you might be surprised to know how much of an impact the age you file for Social Security can have. For Americans born after 1960, the full retirement age for Social Security purposes is 67. However, you can start collecting Social Security benefits at any point between age 62 and 70.

Benefits of claiming early include: permanently reduced. In fact, if your full retirement age is 67 and you decide to start getting your check at 62, your check will be 30% lower than if you waited. On the other hand, if you delay taking Social Security beyond full retirement age, your benefits will permanently increase by 8% for each year you wait until age 70 at the latest.

Now you don’t necessarily have to wait until age 70 or full retirement age. But the point is, if you can wait a few years (or even months) longer than you planned, it can make a big difference.

2. Save more time.

If you decide to continue working a few more years than you planned, you’ll have more time to save and build up your retirement savings. You might want to take advantage of the extra time by increasing your 401(k) or IRA contributions.

Additionally, if you are over 50, your contribution limits are higher compared to the general population. The standard IRA contribution limit for 2024 is $7,000, but $8,000 for account holders age 50 or older. 401(k)s and similar plans are much more generous, allowing those 50 and older to contribute up to $30,500 to a qualified retirement plan in 2024, compared to the standard limit of $23,000.

3. More time for compounding

Finally, waiting until retirement gives you more time to invest and compound your savings. Compound growth is when interest earned on invested or saved cash also earns interest. Of course, there’s no guarantee that your stock investments will perform well in any given year, but delaying retirement for a few years can give you additional time to grow your money.

conclusion

There are many moving parts in deciding when to retire. Not like that only About financial considerations. You want to keep working, but your health may not cooperate. Maybe you’ll lose your job a few years before you would ideally retire. And you might have big plans to go on a trip or spend more time with your family.

The point is that there is no ideal retirement age for everyone. My goal is to get you thinking about the financial benefits of waiting a year or two longer than you originally planned. But ultimately, you need to consider all the pros and cons of retiring at a certain age and make the best decision for you. your loved one.

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