5 Reasons Experts Say You Should Delay Your Retirement
Jim Cramer recommends delaying your retirement. In an interview with CNBC Make It, the host of CNBC’s “Mad Money,” and one of GOBankingRates’ Top 100 money experts, said people who retire too early need more money in savings than they think. Otherwise, Cramer said early retirees may pay for this decision for the rest of their lives.
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While many people do want to retire early so they can lead the retirement lifestyle of their dreams, the reality is that this lifestyle is often expensive — and early retirees may even be sidelined by other unpredictable financial hurdles. Those who decide to delay their retirement until age 70 can expect certain benefits in making this decision. Here are five reasons to consider doing so.
Retirees Who Delay Will Receive Maximum Social Security Payouts
If a retiree chooses to wait until age 70 to retire, the person will receive the maximum payment available through Social Security.
One of the most persistent myths surrounding retirement is that retirees can live off Social Security. This is not true. Social Security is not designed to act as the sole source of income for individuals entering retirement.
Those who decide to delay retirement until age 70 not only will be able to receive the maximum payment available, they can continue using their working years to keep saving. This includes the opportunity to max out contributions on employer-sponsored retirement plans and diversify retirement income buckets. This is especially helpful for retirees who do not have enough in savings and need extra time to financially catch up.
“Delaying your retirement by a few years can be powerful,” said Sri Reddy, SVP of retirement and income solutions at Principal Financial Group. “A delay reduces your amount of necessary retirement income, and increases years to further save.”
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A Delay Means Receiving Healthcare Coverage
Skip Skolnik, senior planner and founder of Skolnik Retirement Solutions, does not recommend retiring without health insurance. Most Americans need to work to at least age 65 when they qualify for Medicare.
While Americans can start claiming Social Security benefits at age 62, it is a good idea to wait until age 65 — if you can’t quite make it to age 70 — to ensure you receive Medicare coverage.
Your Annual Income Likely Will Increase
Those who continue working until age 70 will enjoy steady paychecks and maybe even pay increases along the way. The eight years spent working between age 62 and age 70 give all workers the chance to increase their annual income before they retire. The percentage of that increase can make a huge difference in being able to achieve your desired retirement lifestyle.
“By delaying Social Security, your annual income can increase up to 8% per year for the rest of your life — compounded,” Skolnik said. “For example, postponing Social Security from age 62 until age 70 can result in a 77% increase in annual income for the rest of your life.”
Life Expectancies Are Increasing
Age plays a pivotal role in your decision to retire, beyond reaching an eligible place for healthcare or a larger Social Security payout.
Gabe Krajicek, CEO of Kasasa, said age must be taken into consideration, especially for those who decide to retire early. If you want to retire early, you will need to align these plans with a larger retirement fund.
“Life expectancies are increasing, meaning retirement savings need to increase,” Krajicek said. “Consider where you expect to be 10 years from now and make sure your retirement savings align.”
A Delay Might Be Best for Your Comfort Level
Not everyone lives in anticipation of retirement. Many soon-to-be retirees, especially those who established reputations in their industries as hard workers and thought leaders, may fear the idea of losing that identity. There have even been stories of retirees who “un-retire” and get back into the workforce because they genuinely enjoy their careers.
While there are several good reasons to delay retirement, this decision is a personal one. Take a moment to review your financial situation with a financial advisor. Track whether you might be able to retire early or whether a delay is necessary to ensure you are retiring at the right time.
Crystal Mayer contributed to the reporting for this article.
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