Retiring as soon as possible may seem like an attractive prospect if you're eager to spend your days on the golf course, spoiling your grandkids, or traveling the world. But while there are some benefits to quitting work when you're as young as possible, there are also some big advantages to waiting longer to begin your leisurely life as a retiree.
In fact, there are actually six big advantages of putting off retirement that are worth considering.
Advantage #1 - You can boost your Social Security benefits
One of the single best reasons to delay retirement is to get a larger Social Security benefit.
See, for most people, retiring isn't possible without claiming Social Security. The problem is, any time you claim benefits prior to the age of 70, you're shrinking your checks compared to your maximum possible benefit.
Every retiree has a full retirement age (FRA) when they'll be entitled to their standard benefit. For those who claim ahead of FRA, their standard benefit will be reduced by early filing penalties. But even waiting until you hit this milestone isn't enough to get the largest possible monthly check. To do that, you'll need to wait until 70 to max out your delayed retirement credits.
If you haven't yet reached 70, delaying Social Security until you do could help protect you from financial hardship later in life by ensuring you have more money coming in. And since the last surviving spouse gets survivor's benefits equaling the larger of the two benefits each partner was receiving, waiting until 70 also helps protect your widow(er) if you were the higher earner. Getting more monthly money from Social Security for yourself and your spouse may well be worth staying in the workforce a little longer.
Advantage #2 - You can save more
Retirees generally stop investing for their future and begin withdrawing from retirement savings accounts after quitting work. So, if you opt to stay on the job a little bit longer, you can continue to increase your savings account balance rather than decreasing it. In fact, once you've hit the age of 50, you really get a chance to supercharge your savings, since you become eligible for catch-up contributions that allow you to make larger tax-deductible contributions to 401(k)s, IRAs, and HSAs.
Advantage #3 - You won't have to rely on your savings for as long
Putting off retiring also means less time relying on your savings, since you'll be able to live on your paycheck for a little longer instead of starting to draw down your accounts. The longer you need your savings to support you, the greater the chance that you'll run short of funds before your retirement ends.
Advantage #4 - You can continue relying on your employer's insurance
Healthcare expenses are one of the major costs retirees face -- and it can be especially burdensome to pay for your medical bills when you retire prior to becoming eligible for Medicare. That's because you may need to pay high costs for COBRA coverage if you stay on your employer's policy, or you may get stuck buying individual coverage -- which often comes with higher premiums and deductibles.
If you delay retirement, you should be able to remain on your employer's policy for longer and take advantage of any premium subsidies your company provides. With estimates for the cost of healthcare in retirement coming in as high as $325,000 out-of-pocket for a senior couple in 2020, anything you can do to reduce this huge expense is likely well worth it.
Advantage #5 -You may become eligible for more pension money if your employer provides it
If you get a traditional pension from your employer, chances are good that the number of years you work is going to be a major determining factor in the size of your pension checks. Pension benefits are an extremely valuable source of retirement income when they're guaranteed for life, so taking steps to get the largest checks from your employer only makes good sense.
Advantage #6 - You can stay active and engaged for longer
Working provides you with structure to your day and social connections. Many retirees struggle to find that same purpose after leaving the workforce. That can cause depression and other health problems. If you delay retirement, you can avoid that by getting the physical and mental benefits work provides for a longer period of time.
Of course, none of this means it makes sense for everyone to stay on the job longer than planned. If you have ample money saved and are ready to quit working, the benefits of retiring ASAP may outweigh the downsides. Or if your job is jeopardizing your health, you may be willing to take a financial hit to get out of it.
The key is not to be so focused on early retirement that you lose sight of the benefits of delaying. By considering these advantages, you can make an informed choice and do what's best for your situation.