10 Reasons Not to Retire

Believe it or not, retirement doesn’t always improve your quality of life.

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After decades of working for someone else, it can be a huge relief to finally retire. But retirement doesn't always turn out to be the fun and relaxing time workers often envision it to be. Here are 10 reasons it isn't always a good idea to retire.

No penny pinching. Unless you are very wealthy, you'll have to stick to a strict budget in retirement, which will be dictated by how much you have saved, how your investments perform, and the amount you have coming in from Social Security or a pension. For most people, that will mean developing frugal habits, watching your savings dwindle each year, and hoping your nest egg will last the rest of your life. But if you continue to work, there's less need to pinch pennies. You will still have money coming in for extras, like gifts and travel.

More time to save. Delaying retirement gives your savings more time to accumulate interest. "For every additional year you work, that is one more year you put money aside, and it is one less year that your accumulated savings has to support you," says Eileen Sharkey, a certified financial planner and principal of investment management firm Sharkey, Howes, & Javer in Denver.

Your social life. Many social events revolve around the workplace. When you retire, "You lose your friends at work. They don't have time anymore because they are working and you are not. And if you move, you lose all your friends from the neighborhood," says Sharkey. "If you have worked nonstop for 30 or 40 years and you have no other outside interests, you really need to work hard to develop those before you let the job go."

Your health. It's a good idea to work until you qualify for Medicare at age 65 so you won't have any gaps in your health insurance coverage. And once you qualify for Medicare, you may face significant out-of-pocket costs, including premiums, deductibles, and coinsurance. A job that provides good health coverage can allow you to avoid spending your retirement savings on medical bills. It will also help you to build up a health savings-account balance for the future.

Mental stimulation. A job can help you to continue to challenge yourself. "The most important thing is that a person has a reason for getting up each and every morning. Your brain needs to be stimulated and involved and productive," says Paul Nussbaum, a clinical neuropsychologist and adjunct professor at the University of Pittsburgh School of Medicine. "Having a part-time job is going to give you problems to solve and keep you active and help you with socialization."

Higher Social Security benefits. Workers must wait until age 66 or 67, depending on their year of birth, to claim the full Social Security benefit they have earned. If you sign up before that age, your Social Security monthly payments will be reduced by as much as 30 percent. You can also boost the size of your benefit check by delaying your start date up until age 70. "If you delay claiming Social Security from 66 to age 70, you get an 8 percent increase in benefits for every year you wait," says Sharkey. "With money market accounts giving you 1 percent, that is a much better return."

Further delay taxes. Traditional 401(k) and IRA distributions, and the resulting income tax, typically become required after age 70½. But people who are still working after age 70½ (and don't own 5 percent or more of the company sponsoring the retirement plan) can continue to defer withdrawals from their current 401(k) (but not IRA) until April 1 of the year after they retire.

Pass on your skills. A recent Society for Human Resource Management and AARP survey of employers found that 72 percent consider the retirement of talented older workers to be a potential problem for their organizations. "Older workers have a lot of skills that these companies are in need of and are having a hard time recruiting for," says Mark Schmit, vice president for research at the Society for Human Resource Management. "The knowledge drain that could happen when these people retire could be very dangerous."