Many people dream about retiring in their 60s, leaving behind the grind of day-to-day work in order to pursue their passions. However, increased longevity rates coupled with inadequate savings make this more of a fantasy than a reality for most Americans.
It’s no secret that a growing number of people in the U.S. are falling behind on their retirement savings. The national shortfall in retirement savings is an estimated $4.13 trillion for heads-of-households between the ages of 25 and 64, according to the Employee
Benefit Research Institute. The National Institute on Retirement Security pegs the savings deficit between $6.8 trillion and $14 trillion. On an individual level, one-third of Americans report they have no retirement savings, and 23 percent say they have less than $10,000 saved, according to GOBankingRates research.
Given that so many people haven’t saved enough to retire comfortably, it’s becoming more commonplace to stay in the workforce longer. Indeed, more and more employees have made peace with the new reality and understand the need to postpone retirement into their 70s or beyond. Some are staying in their current roles, while others are choosing to work in less intense positions or fields.
Certainly, working longer won’t be an option for everyone. But there are many benefits for those who are able to extend their working life longer. For starters, by working longer, you’ll be able to set aside more money for your retirement years. With the power of compounding, the extra you save over a few years can really add up.
The dauntingly high cost of healthcare is also a reason to consider staying on the job. A 65-year-old couple retiring in 2016 will need an estimated $260,000 to cover health care costs in retirement, according to Fidelity. Remember, based on current longevity estimates, your retirement could span 30 years or more, so having enough saved to cover healthcare is an important consideration before you decide to forgo a regular paycheck.
The opportunity to boost your Social Security benefits is another reason to delay retirement. You can start taking benefits as soon as you turn age 62 (or earlier in extenuating circumstances). However, taking benefits before you reach your full retirement age, which is between age 66 and 67 for most people, means a permanent reduction in benefits. If you hold off even longer than your full retirement age, you’ll get an 8 percent increase in Social Security benefits for every year you delay, up until age 70. Certainly, there may be reasons to claim your benefits earlier. However, for many people, the added bonus gained by delaying benefits until after age 70 is worth considering.
Your health and well-being is another reason to work longer. After so many years of having their days completely accounted for, many retirees discover they are bored after only a short period of time at home. What’s more, researchers from Oregon State University have found a correlation between working past age 65 and a longer life. Other research shows that employed older adults had better health outcomes than those who were unemployed.
Of course, there are many factors to consider when deciding when to leave the workforce. At Anderson Retirement Solutions, we care about your financial and personal well-being and can help you make decisions that are appropriate for your personal circumstances. Please don’t hesitate to contact us at 888.473.6931 if you’d like to speak further about these topics.