The Effects of Delaying Retirement

If you love your job and are healthy, the relaxing days of retirement can wait awhile.

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If you like your job, you might want to keep working even if you could retire. If you can delay retirement until you’re 70, you’ll continue to earn your income, and you'll get the most out of Social Security. Extra years of income keep you from drawing from your retirement funds or savings -- instead, you’re adding dollars for your future. You earn a little interest while you delay, as well.

Social Security

You’ve been paying into the Social Security retirement fund for years and can draw retirement benefits as early as 62, but you’ll have more money each month if you wait until 70 to collect your benefits. At 62, you receive about 25 percent less each month than if you wait until you’re 66 or 67, whichever is your full retirement age. Full retirement age is 66 for those born before 1960 and 67 for those born in 1960 or later. You’ll get the most you can get each month from Social Security with retirement at 70, since it stops adding funds to your account at that time. Drawing Social Security at 70 instead of 62 gives you about 50 to 57 percent more money each month. That’s because you receive 75 percent of your benefit at 62 and 100 percent at full retirement age. Between full retirement age and 70, you get about 8 percent a year increase for waiting those three or four years -- or another 24 to 32 percent added to the 25 percent increase between 62 and full retirement age.


For each year you continue working, you’re supporting yourself without drawing on retirement funds. You’re probably also adding to a pension plan, 401(k) or IRA as well. Employee health insurance is another benefit of delayed retirement. You can add another benefit if you use your income to pay off debts and get ready for retirement. Owning your house or condo and having no debt during your retirement years will save your retirement income for living expenses and make it last longer.

Retirement Income

As a rule of thumb, Social Security accounts for about 40 percent of the money you’ll need for retirement. You’ll need at least as much each month from some other source. You may have a pension plan from work, but many employees haven’t stayed with a company long enough to draw a pension even if it’s available. If you have a 401(k) or IRA, you might have less money than you think you do. Although you won't have to pay the 10 percent early withdrawal penalty if you are over 59 1/2, you’ll pay income taxes on the money when you use it, even for retirement. A Roth 401(k) or Roth IRA is worth the full amount, tax-free, because you’ve paid the taxes on the contributions upfront in the years you earned that income.

Effect on Your Spouse

Although the Centers for Disease Control and Prevention shows average life expectancy at about 78.5 years in the United States, many people live at least another 10 years. One of the benefits of delaying retirement may be to your spouse. Your spouse obviously will benefit from your delayed retirement with more money available during retirement years. If you die, your surviving spouse receives only one benefit -- whichever is the higher amount between the two of you. If your benefit is higher and you opted for Social Security retirement benefits at age 62, that’s the monthly amount available to your spouse when you’re gone.