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.
- 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.
- 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.
- 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.
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.
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.
Pinyo Bhulipongsanon is the owner of Moolanomy Personal Finance and a Realtor® licensed in Virginia and Maryland. Over the past 20 years, Pinyo has enjoyed a diverse career as an investor, entrepreneur, business executive, educator, financial literacy author, and Realtor®.