Work one more year

So much attention is paid to the ‘retirement’ part of retirement planning that it is easy to overlook the benefits of continuing to work.

In fact,
sometimes the best thing we can do for our retirement is to keep working!

Reason Number One to keep working involves your investments. With a little cooperation from the stock market, one more year of compound interest would be a welcome addition to your retirement nest egg.

I know what you’re thinking, “How much difference could twelve more months make? Shouldn’t I keep a long-term view for investing?” This is true, but on any given year, the stock market is up 71% of the time. Was last year a rough time for stocks?  Maybe working one more year will allow your investments to rebound and help build back some retirement confidence.

Reason Number Two – Health insurance. With average annual premiums for married couples over $15,000 per year, health insurance becomes a significant barrier to retiring early.  At my firm, health insurance is the single largest hurdle for clients who want to retire before age sixty-five. Collecting one more year’s assistance with health insurance from your employer is very helpful.

The Third Reason to delay retirement for one more year is to give yourself a chance to clean up that pesky debt. Stubborn credit card debt and car payments can really make a dent in your future retirement income.  Working one more year could give you a chance to pay off some debts and better prepare you for retirement. If a penny saved is a penny earned, then a monthly payment saved is a retirement paycheck earned!

The Fourth Reason is all about the 401(k) match. Collecting the employer’s match on your 401(k) contributions could be enough reason to consider working one more year.  I’ve always looked at the employer’s contribution as a guaranteed return on my 401(k) contribution, guaranteed returns are rare.

The Fifth Reason to keep working, at least one more year, is the boost you’ll get in your Social Security check.  Social Security represents 39% of total retirement income for the average retiree – that’s a big deal!

When I teach my Social Security adult enrichment class at our local college, most people have no idea how much their Social Security will grow simply by deferring their retirement date.

Did you know that deferring your Social Security by one year will cause it to grow by 8%?  A guaranteed 8% return in 12 months isn’t something available in traditional investments, but you have ready access in your Social Security income.

Bonus!
Delaying retirement can benefit your retirement budget by increasing the amount you can spend! Working one more year turns a thirty year retirement into a twenty-nine year retirement.  All things held equal, you could increase your spending by 3.33% for those remaining 29 years without changing your investments or taking any additional risks.

This might not sound like a lot, but a 3.33% increase on a $50,000 net annual income is an additional $138.75 per month for the rest of your life!

Hopefully these five reasons will better help you decide your optimal retirement date.