The Best Argument Yet for Delaying Your Retirement

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Given that the average American is woefully financially underprepared for retirement, it's no surprise that more than 16% of Americans aged 65 and older are delaying retirement and still working.

It turns out there could be a substantial benefit to doing so: Delaying your retirement could help you live longer.

No, seriously.

Here's the data

According to research recently published in the Journal of Epidemiology and Community Health (link opens a PDF), delaying retirement by a year, from age 65 to 66, resulted in an 11% lower chance of death among a group of 2,956 participants who were tracked from 1992 to 2010.

The researchers controlled for various outside factors, including education, income, and health. The last of those three is particularly interesting, because people who retire early often cite poor health. Previous studies have been unable to tease out whether the fact that folks working later in life are healthier because they're still working -- or working because they're still comparatively healthy.

That's why this study is so interesting: Even among those who said they had health problems, delaying retirement by a year decreased the chance of mortality by 9%. It appears, to quote the study authors, that the "beneficial effect of retiring late may be universal across different sociodemographic profiles."

Other benefits to delaying your retirement

So working longer helps you live longer. But there are other potential benefits, too.

Since we've been talking about physical health, let's also consider mental health. We've known for a while that between 15% and 20% of retirees suffer from poor mental health, most commonly depression. Initially upon retirement, mental health improves because of reduced work-related stress and more leisure time -- but over the longer term, many retirees see their mental health decline in part because of isolation and reduced activity, both of which are probably tied to leaving the workforce. Delay leaving the workforce, and there may be less chance of seeing those mental declines.

Delaying retirement also increases your likelihood of a financially secure retirement. No one likes the idea of outliving his or her nest egg. It's harder to do so if you delay retirement, for four reasons. First, you'll have fewer years when you're living off your savings. If you have, say, $250,000 in retirement funds, it's easier to make that stretch over 10 years than over 20.

Second, consider that those extra years of working should mean extra years of saving. If you're able to sock away, say, $500 a month for the five years from the ages of 65 to 70, that'd work out to an extra $30,000 in savings.

Third, don't forget the power of compounding. If you have additional long-term retirement savings stashed in equity markets via a 401(k), IRA, or brokerage account, those savings will have additional time to compound, hopefully growing your savings even more.

Finally, there are the benefits of delaying taking Social Security until age 70. For every year beyond your full retirement age that you delay taking Social Security benefits, the Social Security Administration will increase your monthly benefit by 8%.

Get the retirement you want

No matter when you decide to retire, the most important thing is that you get the lifestyle you want. For different people that means different things. (My wife and I spend extra on travel -- maybe you'd save money there but really like nice cars. You get the idea.) The easiest way to get there is to estimate your monthly expenses in retirement -- my colleague Brian Stoffel has a collection of averages that should be a useful starting point for you. You'll then want to estimate how much you'll receive from Social Security. Once you've subtracted the amount you'll get from Social Security from those monthly expenses, you have the amount of cash you plan to spend monthly that you won't get from Social Security. Multiply by 12 to get a yearly amount, multiply that number by 25 -- a commonly used rule of thumb -- and you have the total many experts believe you need to save.

From there, it's simply a matter of working and saving. Learn more about the best retirement accounts in which to stash your hard-earned cash, consider the power of investing in the stock market (compounding is a mind-boggling benefit), and get ready to retire in style.

The article The Best Argument Yet for Delaying Your Retirement originally appeared on

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