Many people decide on a specific retirement age well ahead of that milestone. During your 50s, for example, you may decide you want to retire at age 62. Or you may decide in your early 60s that you'd like to leave the workforce at 65.
There's really no such thing as a right or wrong retirement age. And the choice you make should hinge on factors such as your finances, your health, and your personal life goals.
But no matter what retirement age you choose, you might reap a world of benefits if you opt to extend your career for just one extra year. Here are three ways an extra 12 months of work could result in a more comfortable retirement.
1. You'll have a chance to grow your Social Security benefits
Your Social Security benefits are calculated based on your lifetime earnings, and you can sign up starting at age 62. If you claim benefits at that point, however, they'll be reduced. That's because you're not entitled to collect your full monthly benefit until full retirement age (FRA), which falls between 66 and 67, depending on the year in which you were born.
For each year you delay your filing past FRA, your benefits will grow 8%, up until age 70. But either way, working an extra year could mean not filing for Social Security for an extra year -- and snagging a larger benefit, as a result.
2. You'll have an opportunity to add to your nest egg
By the time retirement nears, you may have a paid-off home and lower expenses. As such, you may find that it's fairly easy to max out your retirement-plan contributions.
If you have access to a 401(k) plan and are 50 or over, you can contribute up to $27,000 to your retirement account annually. So if you extend your career a year, your 401(k) could grow that much more robust.
In fact, you could end up boosting your balance even more if your employer offers 401(k) matching dollars. Those don't count toward your annual contribution limit, so depending on your match, working one more year could boost your 401(k) balance by more like $30,000 -- or more.
3. You'll have a chance to keep your existing savings invested
Working an extra year doesn't only have to mean boosting your nest egg -- it could also mean leaving your existing savings untapped for longer. And that could result in more added growth than you'd think.
Let's imagine you have a $1.5 million 401(k). Since you're nearing retirement, you've shifted to conservative investments so that it generates an average annual 5% return. If you work an extra 12 months and keep that sum invested for another year, you'll grow your balance by $75,000. That's not a small amount of money.
You may be eager to retire at a specific age, but before you do, consider the upside of delaying that milestone by just one year. It could really end up making a huge difference in the long run.