West Chester University
Key Takeaways:
- Nearly 1 in 4 Americans are now opting to delay their retirement, many due to the impacts of COVID-19.
- Postponing retirement offers you more time to save money and contribute to your IRA or 401(k), meaning you could potentially stretch your savings further.
- For many people, the ability to retain benefits like health insurance makes it worth staying in the workforce a little longer.
Retirement is something most people look forward to regardless of how much you love your chosen profession or how successful you’ve been. As you age, the question of when you’ll actually retire comes into sharper focus. While many people aim for their mid-60s, nearly 1 in 4 Americans are now delaying their retirement.1 For many, this decision has been driven by the pandemic, which caused families to reevaluate their finances.2 If you’re thinking of adjusting your own timeline, you might want to ask yourself the following questions.
How robust are your retirement accounts?
Simply put, remaining in the workforce may help bolster your retirement savings. After all, you can keep making contributions to your IRA or 401(k) – subject to IRS contribution limits – as well as take advantage of employer match programs, if your plan offers one. And don’t forget that the amount you’re allowed to contribute increases after you turn 50. Even just a few extra years of steady contributions can potentially make a notable difference to your final balance when you leave the workforce.3
How much risk have you taken on with your 401(k) investments?
When it comes to your 401(k), the general wisdom is that the younger you are, the more risks you can take with your investments, because you most likely have more time to recoup your losses. As you age, it’s usually smart to consider a shift towards a more conservative strategy. Of course, this is also dependent on your own appetite for risk and how successful your strategy has been to meet your goals. If your retirement strategy isn’t yet where you’d like it to be, delaying retirement can give you a chance to course-correct, such as switching from an aggressive growth strategy to a more conservative strategy to help with your retirement savings goal.4
There is no guarantee that any investment strategy will achieve its objectives.
It is your responsibility to select and monitor your investment options to meet your retirement objectives. You should review your investment strategy at least annually. You may also want to consult your own independent investment or tax advisor or legal counsel.
Are you in a position to ramp up your nest egg?
In the years immediately preceding retirement, many people are earning the highest salaries of their professional lives. Also, by this point their children may be out of the house and financially independent. If this reflects (or will reflect) your situation, you may want to think about working for a bit longer. After all, it’s a great opportunity to potentially build up your savings or make extra contributions to your retirement accounts.5 This will help you feel more comfortable that your savings will last, especially given that your living expenses won’t necessarily decrease in retirement.6
Are you reliant on your employer’s insurance?
Some people choose to keep working longer so they can hang onto their healthcare benefits. Finding a similar plan on the open market may come with some challenges (and increased costs) and there’s comfort in staying with benefits and providers that are familiar.7
Do you enjoy your career?
It may seem obvious, but this point is often overlooked in retirement planning. If you genuinely like your job, it may make sense to stick around for a little longer. Working can keep you both mentally and physically active, offer social interaction, and provide structure and routine. While it makes sense to focus first on the financial benefits of staying in the workforce, the right job can also help protect your emotional and physical well-being.
Delaying retirement isn’t right for everyone, there are pros and cons to either decision. That’s why it’s a good idea to take time and assess your situation so you can make the most appropriate move for you and your family. A financial advisor can help ensure you feel confident in your decision-making and can provide expert guidance on how to make your dream retirement a reality.
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