Delay Your Retirement — It’s a Powerful Retirement-Savings Move

Key Points

• Postpone retiring, and you can save up more money for your future.

• Your Social Security benefits can get bigger, too.

• And inflation might hurt you less.

• The $23,760 Social Security bonus most retirees completely overlook ›

Many, if not most, of us think we’d love to retire as soon as possible. There are some good reasons to delay your retirement, though — some surprisingly powerful reasons, in fact. I’m sorry to be the bearer of this news, but read on to see whether delaying your retirement might be a smart move for you.

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The many benefits of delaying retirement

Sure, you can save more money while you work a little more. But delaying retirement can do a lot more for you.

You can save and invest more

One of the best reasons to postpone retiring is because you’ll be able to sock away more money and your investments will have more time to grow. Check out the table to see how your money can grow over time:

Data source: Calculations by author.

(I used a somewhat conservative 8% average annual growth because the stock market has averaged annual returns of close to 10% over many decades.)

The bolded lines are for growth periods of 23, 28, and 33 years — each representing an extra three years working beyond 20, 25, and 30 years. So if you had amassed, say, around $1.2 million over 25 years, by working, saving, and investing an additional three years, you’d (potentially) end up with more than $1.5 million — a big difference.

Your nest egg will have to support you for fewer years

Delaying retirement also means shortening it. That might not be ideal, but it means your nest egg will have fewer years that it has to support you. For example, if you retire at 65 and live to 85, that’s a 20-year retirement. But if you retire at 68, your retirement will be 17 years long.

You can keep your work benefits longer — such as health insurance

If you keep working for a few more years, you’ll be able to keep your work benefits longer — which can be a big deal. Health insurance costs, for example, are major in retirement, and while you work, you might stay on your employer’s plan. (If you were planning to retire before age 65, remember that Medicare starts at age 65.)

Another key benefit is 401(k) matching funds that your employer might contribute to your 401(k). The longer you work, the more free money you receive in your account.

A shorter retirement means less inflation damage

Inflation is a fact of life, and it has averaged roughly 3% over long periods. That may seem small, but it’s enough to cut your purchasing power roughly in half over 25 years — so that in your last years, something that cost you, say, $1,000 in 2025 may cost you $2,000 in 2050.

You can collect fatter Social Security checks

You can start collecting Social Security benefits as early as age 62, but your checks will be smaller (though you’ll receive more of them). The longer you delay claiming your benefits, up to age 70, the bigger those checks will be. There are good reasons to claim early or late, but various studies show that for most people, waiting until age 70 is best.

Better still, the bigger you make your benefits, the bigger increase you’ll get almost every year via cost-of-living adjustments (COLAs).

You might collect fatter pension payments

If you’re lucky enough to be working at a job that offers a pension, you may be able to set yourself up for fatter pension payments if you work a few more years. It’s worth finding out how much income you can expect if you retire when you want to and if you retire a few years later.

You might live longer

Yes, if you retire later, you might live a little longer. Why? Well, many people end up feeling aimless and even lonely in retirement without as much of a sense of purpose and with less structure and socializing. If your work life is pleasant enough, you might want to keep it going a bit longer. (Pro tip: Start thinking about how you’ll spend your retirement days, and maybe start getting into some hobbies or social groups.)

Meanwhile, by retiring with a bigger nest egg, you may have less stress and worry throughout your retirement, about whether you might run out of money.

You’ll likely live a little better

Finally, by retiring a little later, you might be able to live a little better. How? Well, If you retire with a bigger nest egg, you may be able to enjoy your retirement more — perhaps being able to do more golfing, traveling, or shopping.

And instead of having a long list of things you want to do in retirement, consider doing some of them while you’re still working. For example, you might be able to take a nice vacation to Italy while you’re still employed, and that might save you from having to take a bite out of your nest egg for it. You might, alternatively, start tackling some mountain hikes on weekends while working instead of just looking forward to doing so in retirement.

Whether you want to delay retirement or you have to delay retirement, know that there are some huge upsides to doing so.

The $23,760 Social Security bonus most retirees completely overlook

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