With countless older Americans far behind on retirement savings, for many people, working longer isn't a choice -- it's an absolute necessity. But here's another reason to consider working longer: It might actually help you live longer. According to a new study from Oregon State University, working past age 65 could prolong your life, while retiring early could actually be a risk factor for dying earlier -- yikes!
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Working longer is good for you
The researchers from Oregon State found that healthy adults who retired at 66 instead of 65 had an 11% lower risk of death even when taking lifestyle, demographic, and health issues into account. Furthermore, even those who described themselves as unhealthy were found to stand a greater chance of living longer if they continued working past 65. These findings are consistent with research from the Institute of Economic Affairs, which found that retirement can increase the chances of clinical depression by 40%, as well as the likelihood of developing at least one physical disorder by roughly 60%.
For many older Americans, working doesn't just provide a monetary benefit; it provides a social outlet and a chance to maintain their physical and mental strength. Boredom in retirement is a very real concern, especially for those who don't have the money to travel, take classes, or indulge their hobbies. Working gives you a chance to use your brain, and for some people, commuting serves as a vital source of exercise. Finding a similar level of mental and physical stimulation can be challenging in retirement, which is why leaving the workforce as early as possible may not be as healthy a move as you once thought.
Working longer is good for your finances, too
Of course, it's hard to argue the fact that spending a few extra years in the workforce can also work wonders for your savings. Whether you're behind on your retirement plan contributions or simply want to pad your balance, two or three extra years can make a big difference in the long run. If, for example, you're able to sock away an additional $20,000 by working a few extra years, over the course of a 20-year retirement, that's an extra $1,000 a year, or $83 a month, in income, not including any growth that money might see from investments.
Furthermore, if your employer offers a 401(k) with a matching program, you might reap even more benefits by staying in the workforce longer and contributing. An employer 401(k) match is basically the same thing as free money, and the longer you're able to take advantage of it, the better. For 2016, anyone 50 or older is allowed to contribute up to $24,000 to a 401(k), and that money can all go in before taxes.
Working longer means maximizing your Social Security benefits
Not only does working longer give you a chance to save more money, but it can actually help you make the most of your Social Security benefits. If you retire before your full Social Security retirement age, your monthly benefits will be reduced by 6.67% for up to 36 months, and then by 5% beyond that point. So if your full retirement age is 66 and you start taking benefits at 65, you'll reduce them by 6.67%. If you claim them at 62 -- the earliest possible age to begin collecting Social Security -- you'll reduce them by 25%. Furthermore, these reductions will remain in effect for as long as you continue to collect Social Security.
On the other hand, for every year you delay Social Security, you get an 8% increase in benefits up until you reach age 70, at which point there's no additional financial incentive to delay. So if your full retirement age is 66 and you postpone retirement by a year, you'll increase your benefit to 108% of its original amount. Wait till 70, and you'll get 132% of what you would've gotten had you claimed at 66. Best of all, you get to collect that higher benefit for the rest of your life.
While the idea of retiring early might appeal to you on a certain level, there are many benefits to delaying retirement even by a year or two. Another thing to remember is that retirement doesn't have to be an all-or-nothing prospect. If you're tired of struggling through the daily grind but aren't ready to completely call it quits, talk to your employer about a semi-retirement arrangement. Or try finding a new job situation that better meets your needs. Working longer is a great way to improve your mental, physical, emotional, and financial health, so it pays to see what options might be available to you.
