Increasingly, Americans are pushing back their ideal retirement age. The age workers expect to retire rose from an average of 60 in 1995 to 66 in 2011, according to a recent Gallup poll. And a Harris Interactive survey released last week found that Americans age 55 and older plan to work until they're 69, up from age 64 in 2001. Working longer has a variety of economic and social benefits. "At the bottom end of the socioeconomic scale, people need the money and the insurance to make ends meet, and at the upper-end people are working because they want to," says Joseph Quinn, a Boston College economics professor. Here are 10 reasons you may want to consider delaying retirement:
More time to save. The years immediately before you retire are often some of the best years to save. That's because you'll likely earn more during these years than you did earlier in your career. And once children become financially independent, parents have a unique opportunity to significantly boost their retirement savings. Workers over 50 can delay paying taxes on an extra $5,500 in a 401(k) and an extra $1,000 in an IRA than their younger counterparts.
Less retirement years to finance. Many healthy baby boomers can expect to spend 20 or even 30 years in retirement. Postponing retirement means there will be fewer years without income from work that you'll need to finance. Even working part-time in retirement can allow you to draw down your savings more slowly.
Continue to delay taxes. Withdrawals from traditional 401(k)s generally become required after age 70½. However, if you are still working and don't own 5 percent or more of the business sponsoring the retirement plan, you can continue to delay paying income tax on retirement savings within a 401(k). Withdrawals from traditional IRAs will still be required, even if you keep working into your 70s.
Higher Social Security checks. Your Social Security payments will increase for each year you delay signing up between ages 62 and 70. A worker born in 1965 currently earning $50,000 per year can expect to receive about $1,340 per month if he or she begins collecting benefits at age 62, according to AARP's new Social Security benefits calculator. That amount will increase to $1,915 per month if he or she delays claiming until 67, and to $2,374 monthly at age 70. The age you can claim the full amount you are entitled to is in the process of being increased from age 65 to 67, which means you will have to work longer than your parents did to get a comparable level of Social Security benefits.
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Health benefits. Workers can't sign up for Medicare until age 65. Finding affordable individual health-insurance coverage, if you qualify at all, can be extremely difficult for people who lose the group coverage provided by an employer. Holding onto your job or finding a part-time job with benefits can be the most cost-effective way to find health insurance before age 65.
Improve your social life. Money isn't the only thing our jobs provide. We form friendships with colleagues and become part of workplace communities. "A lot of people have their main social interactions with their colleagues at work," says Jay Wintrob, president and CEO of SunAmerica Financial Group. "They become friends and get to know one another's families and work keeps them in the mix and being viewed as being productive."
Protect your marriage. When to retire, where to live, and how to pay for it are often points of conflict for married couples. The majority of married couples ages 46 to 75 disagree about their expected retirement ages (62 percent) and what their top source of retirement income will be (55 percent), according to a Richard Day Research survey of 648 married couples commissioned by Fidelity Investments. And even once you both agree to retire, adjusting to a new life in which you are together all day, every day can be difficult, and new routines must be forged.
Stay involved. In 2001, a Harris Interactive survey commissioned by SunAmerica Financial Group and Age Wave found that many people viewed retirement has a continuance of what life was (40 percent), and 22 percent viewed it as a winding down of life. Now, most people (54 percent) see retirement as an opportunity for a whole new chapter in life. "People want to travel and learn new things and continue to have adventures," says Ken Dychtwald, president of the consulting firm Age Wave and author of With Purpose: Going From Success to Significance in Work and Life. "Retirees don't want to move to a golf course or condominium community, but move to a college town, which is where the action is." Working in some capacity is often part of the plan. Almost two-thirds (65 percent) of the survey respondents say they would ideally like to include some work in retirement, ranking the "stimulation and satisfaction" they get from their jobs above money as the top reason they want to work during retirement. "You get so much from work in addition to the paycheck," says Quinn. "It's a lifestyle choice."
Give something back. Many people approaching retirement have knowledge and skills they would like to pass on to the next generation. Some people would also like to leave a legacy for their children or the community that supported them throughout their career. One way to do this is to continue to work or volunteer in some capacity.
Flexible scheduling. When you have some money coming in from other sources such as Social Security, a pension, or your savings, you can afford to work less. Many people say they want to work part-time (25 percent) or cycle between periods of work and leisure (36 percent) in retirement, Harris Interactive found. Only 30 percent of those surveyed never want to work for pay again, and just 4 percent want to work full-time in retirement. "When people leave their career jobs, most of them don't leave the labor force at the same time," says Quinn. "They move to some other job that is of shorter duration than their career job, perhaps working three days a week or six months a year, doing something completely different." If you only need to put in 20 hours per week, delaying retirement doesn't sound so bad.