Should you work past your retirement age?

Working past retirement

It’s common for investors to hear that they should delay retirement and work for an additional few years. Although the benefits and implications that come along with working past retirement age may seem obvious, it doesn’t always register how age can impact retirement savings.

The amount of money they’ll need to live on in retirement is a function of what it will cost for them to support and enjoy themselves. By working past retirement age, an investor is delaying distributions from the portfolio. These additional working years allow additional time for assets to grow, while simultaneously decreasing the portfolio lifetime distribution requirements. 

Secondly, while an investor is working for those additional years past retirement, they should be continuing to contribute to a retirement plan and savings. Not only are they able to avoid tapping into these funds, but they’re also adding to them and allowing them to grow. By extension, they’ll continue to participate in the markets, which may have a pretty significant impact on retirement savings. 

It’s common for investors in their 50s to meet with their financial advisor and have a goal set to retire by the age of 60. Although it may be possible for them to retire by that age, working just a few extra years may drastically increase their financial well-being.

Social Security will also be impacted if they delay retirement and remain in the workforce. If an investor chooses to remain in the workforce and doesn’t tap into Social Security, those benefits will continue to grow and in turn curb how much they’ll have to take out of their retirement savings.

Although working for a few additional years is beneficial when it comes to contributions and savings, it’s important for investors not to rely on working those additional few years because they don’t know what the state of their health may be. More than 40% of early retirees are forced to retire early due to health issues or disability, according to the Employee Benefit Research Institute. 

There are a variety of financial benefits that working longer can have. Still, there are also non-financial benefits that come along with staying in the workforce longer. Working past retirement age may help give aging Americans a sense of purpose and give them something fulfilling to do. A significant number of people are concerned about entering retirement because their identity is wrapped up in their job and what they do. Continuing to work can also provide retirees with a way to socialize and be around a diverse set of age groups. 

Investors must be prepared both financially and emotionally when choosing the age at which they want to retire. Even though working a few additional years is a great way to bolster retirement savings, investors should meet with their advisor early on so they can create a plan that will help ensure they’re making the best decision possible.