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Delaying Retirement Could Mean Working a Lot Longer Than You'd Expect

By Maurie Backman – Feb 17, 2020 at 7:47AM

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New data reveals that workers who hold off on retiring don't just spend an extra year or two in the workforce -- they get stuck there much, much longer.

Americans are living longer these days. That's a good thing in theory, but it poses a challenge from a retirement savings standpoint. Workers today need to sock away even more money for their golden years to ensure that they don't run out, and those who fail to save adequately are often forced to delay retirement in order to boost their cash reserves.

But if you opt to delay retirement, you may end up plugging away longer than expected. In a recent MetLife survey, 21% of workers aged 55 and over have delayed retirement, or expect to delay that milestone. But what's surprising is that the average person in that category either delayed retirement by 4.4 years, or expects to delay by that long a time period. Not only that, but for 34% of older workers who delayed or plan to delay retirement, that extra time in the workforce amounts to five years or more.

Older man typing on computer keyboard

IMAGE SOURCE: GETTY IMAGES.

If you're eager to retire on schedule, a few key moves earlier on in your career could be your ticket to achieving that goal. And that way, you won't have to risk plugging away on the job for much longer than you want to.

Set yourself up to retire on time

To be clear, delaying retirement can be helpful in a number of ways. First, the longer you work, the more opportunity you have to boost your nest egg, all the while leaving your existing savings untouched. Working longer might also make it possible to delay your Social Security filing, thereby boosting your benefits in the process. And some studies have found that working longer has health benefits -- enough to lead to a longer life.

But still, working longer may be something you don't want to do, and if that's the case, you can avoid it by beginning to save for retirement as early on in your career as you can. That way, you'll give yourself plenty of time to invest your savings and capitalize on the power of compounding.

Let's assume your income and expenses are such that it's only reasonable to set aside $400 a month for retirement -- not more. Here's what your savings might amount to, depending on the timeframe you give yourself:

If You Start Saving $400 a Month at Age:

Here's What You'll Have by Age 67 (Assumes an Average Annual 7% Return)

27

$958,000

32

$663,000

37

$453,000

42

$304,000

47

$197,000

Data source: author.

Delaying your savings efforts could result in a scenario where you have no choice but to stay in the workforce a lot longer than you'd like, because while $958,000 is a nice chunk of money to retire with, $197,000 probably won't cut it in the course of what could be a 20-year retirement or longer.

But saving from a relatively early age isn't the only thing you need to do. You also need to invest your nest egg somewhat aggressively -- namely, by going heavy on stocks to generate decent growth. In the table above, we used a 7% average annual return, which is a reasonable assumption for a stock-heavy portfolio. But if you play it too safe so that your savings only generate a 4% average annual return, here's what the above numbers drop to:

If You Start Saving $400 a Month at Age:

Here's What You'll Have by Age 67 (Assumes an Average Annual 4% Return)

27

$456,000

32

$353,000

37

$269,000

42

$200,000

47

$143,000

Data source: author.

Delaying retirement for a few months, or even a couple of years, may not be such a hard pill to swallow. Working more than four years longer than planned, however, is a different story. If you don't want to land in a position where you're forced to work a lot longer than you want to, make building a nest egg a priority early on, and invest your savings aggressively. Doing so will increase your chances of getting to leave the workforce at the time you deem is right.

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