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Should You Delay Retirement? Ask Yourself These 4 Questions to Find Out

By Maurie Backman – Aug 12, 2019 at 5:18AM

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It sometimes pays to extend your career -- even if that's not your plan.

If you've been part of the workforce for quite some time, chances are, you're looking forward to retirement and the more laid-back lifestyle that comes with it. In fact, you may even be planning your escape from the workforce imminently. But in some cases, postponing retirement could make your golden years far more enjoyable. And these key questions will help you determine whether that's the right move.

1. What do my savings look like?

Social Security only replaces about 40% of the average earner's pre-retirement income. Most seniors, meanwhile, need around double that amount to live comfortably. That's why you'll need to take a serious look at your savings before moving forward with retirement. If they're not up to snuff, you may need to work a bit longer to boost your nest egg.

Older man resting his chin on his hands

IMAGE SOURCE: GETTY IMAGES.

But don't just look at your IRA or 401(k) balance. Rather, see how much annual income that balance will provide for you. If you follow the 4% rule, which many financial planners advocate, you can withdraw roughly 4% of your nest egg annually without having to worry about running out of money for a good 30 years. Therefore, if you're sitting on a $400,000 savings balance, that might seem like a lot of cash. But withdrawing 4% of that sum each year gives you just $16,000 in annual income.

Even if you get another $24,000 a year in Social Security benefits, you're looking at living on $40,000. If that's not enough to cover the expenses you anticipate having, then you'll need to delay retirement to boost your savings.

2. Have I reached full retirement age for Social Security purposes?

Though your Social Security benefits are based on your earnings history, the age you claim them at will dictate how much money you actually receive each month. If you file for benefits at full retirement age, which is either 66, 67, or somewhere in between, depending on the year you were born, you'll get the exact monthly payment your earning record entitles you to. But if you file before that point (you can take benefits as early as age 62), you'll have those monthly payments reduced, and in most cases, on a permanent basis.

Before you make the decision to retire, figure out whether you've reached full retirement age, and if you haven't, think about whether you'll manage to pay your bills without Social Security. If that's not the case, and you expect to claim benefits right away, you could face a reduction that hurts you on a long-term basis -- in which case delaying retirement makes sense.

Another thing to keep in mind is that if you hold off on claiming Social Security past your full retirement age, you'll boost your benefits by 8% a year up until age 70. If your savings aren't great, that lifelong increase in benefits could come in very handy, so even if you have reached full retirement age, it might still pay to put off retirement for a while.

3. Do I enjoy going to work?

Many retirees grow bored and restless very quickly, especially those who go from a 40-hour-a-week work schedule to no schedule at all. Now if you hate your job and are itching to quit, then it makes sense that you'd want to retire as soon as possible. But if you love your work, enjoy the company of your colleagues, and like the idea of having a structured schedule, then it might pay to delay retirement and keep at it. Even if you don't need the extra money, it could be the right decision from a mental and emotional perspective.

4. Do I have people to spend time with in retirement?

Just as boredom can be a big problem for seniors, so too can loneliness take a toll. If you have friends or family members who are already retired, then you'll have some company on hand if you do the same. But if none of your friends or relatives are retired, and none of them are expected to leave the workforce anytime soon, then it pays to delay your own retirement until you find people in a similar boat.

There's nothing wrong with establishing your ideal retirement timeline and sticking to it. But before you make your retirement official, ask yourself whether delaying that milestone is a better way to go. You may find that staying in the workforce even a few months longer than planned is a move that pays off in the long run.

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