3 Benefits of Delaying Your Retirement

Recent economic mess and stock market decline left many people wondering if they’ll have enough money for their retirement. Many will just have to adopt a more frugal lifestyle, but some people are lucky enough to have the option to delay their retirement. If you are in this latter group of people, here are several reasons why postponing your retirement might be a good idea.

  1. It allows you to keep adding more money to your retirement savings. Not only are you delaying the withdrawal, the new fund will help your portfolio grow in the right direction.
  2. It gives your portfolio more time to grow — or in our case, to recover. Assuming you have a $500,000 retirement portfolio and it grows at 5% per year for the next 3 years, you would end up with $579,000. Your additional contribution over the 3 years could easily put this over $600,000.
  3. Each additional year that you work is one less year that you’ll have to depend on your retirement savings. If you need $24,000 a year to retire, that $72,000 you don’t have to withdraw over the first three years.

portfolio growth

Delaying Your Social Security

In addition to keeping your money invested, you could also delay your Social Security benefit. Each year that you do, the benefit increases by 8% between the full retirement age and 70 (www.ssa.gov), thus giving you more money to work with when you need it. For example, if your benefit at full retirement age were $1,000 a month, you would get $1,080 by delaying a year, $1,166 for 2, and $1,260 for 3.

ssocial security benefit growth

Several of my friends decided to postpone their retirement because of the economy and stock market decline. Are you doing this as well? Why? Please share your story.

About the Author

By , on Jun 3, 2009
Pinyo is the owner of Moolanomy Personal Finance. He is a licensed Realtor specializing in residential homes in the Northern Virginia area. Over the past 20 years, Pinyo has enjoyed a diverse career as an investor, entrepreneur, business executive, educator, and financial literacy author.

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Leave Your Comment (4 Comments)

  1. David says:

    I had always planned to take SS at 62 just because I didn’t know how long I would live and thought it would be better to get some money now just in case. However, I have now changed my tune a little due to the other possible extreme . . . what if I live into my 90’s like several relatives have (my mother is a very healthy 86)? Would my retirement money last that long?

    So, I am now leaning toward using my 401k and IRA’s until I’m 70 and then start drawing SS which will keep coming until I die (assuming the system doesn’t break completely in the coming years). The larger payment I would receive at 70 would be pretty close to a livable income, at least when combined with my wife’s.

    My question is, does the SS payment keep increasing about 8% for each year delayed even if I’m not working and contributing (I have put in the 35 years of employment which determines the amount of the SS check)? If it doesn’t, waiting until 70 (or any age past my actual retirement date) would make no sense.

  2. craig says:

    Because people live longer today, it seems more people are doing just that. Being young, retirement is the furthest thing in my mind but have recently begun preparing by opening a Roth IRA. Also, I think more people have less patience today than in the past and would prefer to work at least part time later in age than full out retire.

  3. Kim Staudenraus says:

    Good post as always. Delaying SS Benefits has always been a concern of mine. Yes, you “may” get more money per month, if there is money to be had. SS is something you put into all your working life and with the financial mess the government is in, IMHO, I would begin to pull that as soon as possible while the getting is good. Also, if you live long enough you will pull for more years, hence making up for the difference in the monthly increase. SS Benefits is really a supplement to retirement income. With all that said, I totally agree with the down turn in the stock market 401k’s have decreased which has increased the possibility to have to work longer. It is so important to focus on years to retirement and then appropriately moving your funds to a lower risk investment at the 7, 5, and 3 year marks prior to retirement to avoid these down turn hits at the wrong time.

  4. DDFD says:

    This is a good post on delaying retirement– why not get the full SS benes?

    Personally, I have always thought I would never fully retire — not because I am a workaholic, but rather I like keeping my mind busy.

    I envision retirement as being project and travel oriented. There things I would like to do (that would provide an income) and places I would like to see — even locally (I have set for in 38 or 39 states — I would like to go to the rest).

    I have often thought of teaching as well. I used to be an adjunct professor at local colleges and universities.

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