Some of the Unexpected Benefits of Working Longer before Retiring

Some of the Unexpected Benefits of Working Longer before Retiring

While many people dream of retiring early, the truth is that delaying retirement has a number of benefits. People choose to stay in the workforce for a variety of reasons, from needing more time to save money to simply loving their job.

The number of people working past usual retirement age has slowly increased since about the mid-1990s, according to the Bureau of Labor Statistics, and these individuals are making more money on average than ever before. In fact, the average earnings growth for post-retirement age employees is the fastest growing among all segments of workers. In addition to more earnings, people who delay retirement often experience some unexpected bonuses from this decision, such as the following:

1. More social interaction

Work provides an immediate social network and helps keep people from feeling isolated. While at work, individuals often have someone around to talk to, and this engagement is very important as people age. After retirement, many people start to feel socially isolated, but working longer helps individuals maintain an important social outlet. Further, this interaction does not feel forced like some of the other options for being social in retirement.

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2. Higher Social Security income

Overall Social Security benefits increase the longer you wait to start claiming them, at least up until the age of 70. Working longer makes it easier to delay claiming the benefit, and therefore you can maximize the monthly check you receive. Also, the benefit is based on an individual’s highest-earning 35 years, so working longer for a higher wage will also help increase the benefit you ultimately receive.

3. Fewer years to finance

Another benefit of waiting to retire is that you will have fewer years to finance in retirement. This means that you can actually use more of your nest egg each year without fear of running out of money. One way to think about it is that by choosing to work longer you are simultaneously saving more money and reducing the amount of time you need to stretch your savings.

4. More meaningful work

For many people, working longer is rewarding because it allows them to engage in more meaningful work. Seniority comes with perks. According to Rand Corporation, many older workers get to choose their own projects and they may have greater flexibility with their hours. The think tank also found that older workers tend to find their employment more useful and satisfying.

5. A better overall transition

People often find it jarring to stop doing something they have done for decades. The transition involves embracing a new routine and finding new hobbies to pass the time. This becomes difficult for people who have largely built their identity around their career. When you continue to work, you have more time to think through these issues, especially as you see friends retire, so you will be better at navigating it later on.

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6. Postponed 401(k) withdrawals

Retirees generally face required minimum distributions once they reach the age of 70 1/2. Several accounts have this requirement, including IRAs, 401(k)s, and 403(b)s. With 401(k) plans, many providers allow individuals to postpone these required distributions without penalty while they continue to work, which helps maintain their nest egg for longer.

7. Better alignment with a spouse

Another benefit of working longer is the ability to align retirement with your spouse. When two spouses retire at different times, tensions can arise in terms of personal schedules, household chores, and budgeting. When both parties continue to work, they have more time to set expectations and plan. Often, it makes it possible to retire at the same time, although this is certainly not required.

Downsides

Despite these benefits, working longer before retirement does have some drawbacks. One of the issues that you may not immediately think about is that people who delay retirement often end up working longer than expected.

According to a recent MetLife survey, 21 percent of workers 55 or older expect to delay retirement or already have. These individuals on average have an expected delay of 4.4 years, yet more than a third of people who have already delayed retirement ended up spending five years or more in the workforce. While some of these people chose to work longer than expected to save more, some individuals likely felt like they had no choice.

Some people have felt forced into working longer than expected so they could meet their financial goals for retirement. You can avoid putting yourself in this position by starting to save as early as possible. When you make building a nest egg a priority, you have more control over your retirement timeline and will not find yourself working longer than you initially expected. After all, it is better to be in the position of choosing to work longer to improve your standard of living during retirement than feeling forced into working because your basic financial goals have not yet been met.