Decision Points: Should I Postpone My Retirement?

For most of us, retirement is the ultimate reward after a long life of hard work. Yet some of our retirement futures may not be as secure as we would like. If the market is dipping as you approach retirement age, you may be considering postponing your golden years a little longer in order to reap richer rewards. To help make your decision a little easier, here are some of the major advantages and disadvantages associated with postponing retirement.

Retirement Pros

Some of the benefits to retirement are quite obvious. You’ll begin a well-earned break from the trials and stresses of working life as you prepare to enter your golden years. If you’re well prepared financially or flexible about your quality of life, then deciding to forgo the extra cash in exchange for the freedom to start a new chapter of your life should be a no-brainer. Of course, if you choose to retire as planned, you’ll need to assess your finances thoroughly to ensure that you will remain well-supported throughout the rest of your life.

Certified Public Accountant and member of the AICPA’s National CPA Literacy Commission, Ted Sarenski, warns that with poor financial planning, you risk having insufficient funds supplementing your Social Security to live your desired lifestyle after retirement.

“For a quick calculation of what I need to have saved when I retire; take the desired budget, subtract what you would receive from Social Security, multiply the result by 25.” If your savings fall short of this amount, you’ll most likely need to postpone your retirement, he says.

Retirement Cons

According to the AARP, the single most important question you need to consider when deciding whether or not to delay retirement is if you will have, at a minimum, enough lifetime income to cover your basic living expenses. If you decide that your retirement fund is insufficient to support you and your dependents throughout the rest of your life, you’ll almost certainly need to postpone your retirement. Even if you do decide that you’ve saved enough to get by, you may still experience a significant dip in your quality of life. Remember, if you retire in your fifties or sixties, you may still live for another 30 or 40 years, so you need to be sure that your finances are well prepared.

Postponement Pros

While spending a few more years in the workforce may not sound like an appealing prospect, for some it can greatly enhance their quality of life throughout the years that follow. Of course, postponement will allow your investments further time to grow, and decrease the amount of time spent drawing down your investments, but there are even further benefits to be gained.

According to Social Security Online, each additional year of full-time work adds another year of earnings to your Social Security record, which can result in higher benefits when you retire. In addition, individuals will receive delayed retirement credits, which increase each extra year you work after retirement age.

Postponement Cons

While delayed retirement yields a host of financial benefits, for some these simply do not outweigh the opportunity to spend those extra few years enjoying the freedom and comfort of retirement.

If you’re sure that you’ll be financially supported for all eventualities, then perhaps it’s time to avail of that long-deserved rest. What’s more, some retirees can use this new-found freedom to begin a new financial venture, such as starting a business.