The Upside to a Delayed Retirement
One of the most disappointing financial situations facing many right now is the prospect of delayed retirement. Take heart... it's not all bad news.
One of the biggest benefits of delaying retirement is that you can defer taking Social Security until you're older.
Another benefit is that now you have an opportunity to boost your nest egg.
Your delayed retirement can come from a number causes, including:
- Economic and market conditions reduce the size of your portfolio.
- Unexpected expenses or a difficult family financial situation make it necessary for you to keep working.
- You are concerned about benefits, so you want to keep working in order to retain them (particularly health benefits).
- Higher debt level means that you aren’t quite ready to retire.
- You aren’t really sure what you’ll do with all the extra time on your hands.
For some, delayed retirement is a choice, and for others it is a necessity. How you feel about your delayed retirement depends largely on the circumstance surrounding the delay, as well as the reason for the delay.
Weigh the pros and cons of delaying retirement
For many, the main downside to a delayed retirement is that, well, retirement has been put off. You don’t get to start traveling the world as soon as you would like, or you can’t just quit your job and spend more time on your hobby. The main disappointment with delayed retirement is the perceived loss of freedom. If you have been expecting retirement to be this amazing, freeing experience, delaying it can seem like remaining in bondage – especially if you don’t like your job.
You can get beyond some of those feelings by considering the benefits of a delayed retirement. One of the biggest benefits is that you can defer taking Social Security until you older. The longer you wait, the larger your monthly benefits. Just waiting three or four more years to begin taking benefits can mean a difference of a few hundred dollars a month.
Another benefit is that now you have an opportunity to boost your nest egg. More money means more retirement account contributions. Don’t panic and sell your investments during tough times, when the market is low. Instead, take advantage of the opportunity to buy on discount. You might even end up in a better position.
Your health can also benefit from the way you stay active at work. Your mind keeps working, and the social interactions can help your emotional health. Plus, you retain those benefits. Many early retirees find themselves stuck in that no man’s land where they don’t have a company health plan, but they can’t start taking Medicare.
Your delayed retirement might even come with some unexpected perks. Instead of sticking with your current job, continue taking on a different job. This can provide you with a new challenge, and you just might be surprised to find that you enjoy working. Don’t assume that delayed retirement has to mean the end of the world. It might actually be an unexpected blessing in disguise.
Jon Stein on “How I Built This:” Reflecting On Our Story
Jon Stein joins NPR’s Guy Raz for an episode of “How I Built This” to look back at how Betterment started, what mistakes were made, and how they turned into learnings for the robo-advisor we are today.
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