You can see the light at the end of the tunnel. You’ve already maxed out your 401K contributions, a succession plan is in place for your position, and you’ve begun to make a list of all the places you want to go and things you want to do upon leaving the workforce. All you need to do is give your boss a date, and he’ll call the caterer for your retirement party.
Yes, it’s tempting to retire as soon as you feel like you’d be comfortably able to, but experts are warning that this may not be the best decision – at least as it pertains to your financial future.
In fact, researchers at Stanford and George Mason recently released a report stating that if you just toughed out your job for another three to six months past your intended retirement date, you’d likely earn a full additional percentage point more of your salary across 30 years. That has the potentially to be incredibly significant, and when you throw in other factors like Social Security benefits, the payoff can be well worth it if you’re just willing to work for a couple of more months. Here’s a closer look.
Social Security Benefits
Though you can begin claiming Social Security benefits at the age of 62, most financial experts encourage workers to hold off doing so until 66, which is considered full retirement age. That’s largely because you’ll then qualify for 100 percent of the benefits available to you by holding out, thereby maximizing your check each month. Conversely, you’ll receive a much lesser amount if you were to start claiming it before you reached “full retirement age.”
On a further note, if you wait a few more years until you’re 70, then your benefit will amount to more than 130 percent. Working longer can help you bide your time until you reach some of these important Social Security milestones, especially if you’re among the majority of Americans these days that don’t have a pension plan to fall back on after you call it a career. Delay Social Security beyond your full retirement age, and you’ll increase your benefits by nearly 8 percent year over year.
Save Wisely
Another tip financial experts recommend is increasing your 401K contributions by 1 percent in the 10 years leading up to your intended retirement. Experts say that doing this will about equal working one month longer. Needless to say, but when you retire shouldn’t be a surprise to you. You should want to go out on your own terms, and part of being able to do this and live comfortably in your golden years includes planning appropriately. Take advantage of the resources provided by your employer to ensure you’ll be able to reach your financial goals in retirement.
Prohibiting Factors
Despite the financial value in working just a few months longer than you initially plan to, there are a few prohibiting factors that can put a wrench in such a plan. Factors such as buyouts and layoffs, having to care for a spouse or family member that’s ill, or your own personal health issues can send individuals into retirement even earlier than what they intend. There’s also the possibility that an employer will offer you an early retirement package that’s just too good to pass up. These variables can certainly complicate the value proposition of working three to six months longer and should be considered on a situational basis.
While we get how eager you may be to get out of the workforce and starting spending time doing the things you’ve always wanted to do, sticking it out for just a few more months can pay big dividends. So, if you’re finishing out your career at a job that you’ve always enjoyed, then see if you can give it a little bit longer. An additional 1 percent on 30 years of salary can go a long way when you decide to hang things up for good, and it can make that retirement party cake taste even sweeter in the long run.
Regards,
Ethan Warrick
Editor
Wealth Authority
