The COVID-19 crisis has had a huge economic impact ever since U.S. case numbers started climbing in March. Not only have millions of Americans lost their jobs in its wake, but investment and retirement plan portfolios have taken their share of beatings.
It's not surprising, then, to learn that the pandemic is causing a large chunk of older Americans to change their retirement plans. In fact, 16% have already delayed retirement because of COVID-19, according to a recent TD Ameritrade survey, while 21% are considering it.
If you're nearing retirement, you may be in a strong enough financial position to move forward with it. Or, you may be too nervous to pull the trigger on retirement at a time when there's so much economic uncertainty. Both decisions have merit, but here's why it could pay to delay that milestone and wait things out.
1. You'll give your retirement savings time to recover
Many retirement plans lost value when the stock market tanked in March, and while there's been a nice level of recovery thus far, some older Americans may still be looking at less money in their IRAs or 401(k)s than they had before the pandemic started. The upside of delaying retirement is that you'll give your savings time to recover so that you don't risk locking in permanent losses.
2. You'll have a chance to build even more savings
The longer you work, the more savings you'll have an opportunity to build. And that could come in handy once retirement kicks in and you realize your expenses are more substantial than you may have expected. Try as you may to budget for retirement ahead of time, sometimes, it's hard to know exactly what your bills will look like until you actually start paying them. For example, you can run numbers to try to see what healthcare will cost you under Medicare, but until you're paying those premiums and copays, the exact numbers can be hard to nail down. By boosting your savings, you'll buy yourself more financial wiggle room later in life, and spare yourself unwanted stress.
3. You may have an opportunity to grow your Social Security benefits
You're entitled to your full monthly Social Security benefit based on your earnings history once you reach full retirement age, which is either 66, 67, or 66 and a specific number of months, depending on your year of birth. But if you postpone retirement and work past that point, you'll have an opportunity to delay your filing, and for each year you do, your benefits will increase by 8%, up until age 70. And to be clear, that's a permanent increase in your monthly Social Security income, which could also be instrumental in alleviating financial stress down the line.
Some people may have no choice but to delay retirement in light of the COVID-19 crisis. If you're on the fence, think about not just the financial benefits of postponing retirement, but the mental benefits as well. Delaying retirement could buy you some much-desired peace of mind, and that alone could be a good enough reason to put in a few more years on the job before calling it quits.