There's a reason many seniors are inspired to retire at 65. Age 65 is when Medicare eligibility kicks in, so it's easy to associate 65 with retirement. But actually, retiring at 65 is a decision you might regret. Here are a few reasons to leave the workforce at a later age.
1. You don't want to shrink your Social Security benefits
Age 65 may be when Medicare eligibility begins, but it's not full retirement age (FRA) for Social Security purposes. Rather, FRA kicks in at 66, 67, or somewhere in between, depending on your year of birth.
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You are allowed to start collecting Social Security at age 65. In fact, you can file as early as age 62. But for each month you file for benefits before reaching FRA, they'll be reduced on a permanent basis. And that's a hit you may not want to take.
If your FRA is age 67 but you retire at 65 and claim Social Security right away, you'll slash your benefits by about 13.34%. That means a monthly benefit of $1,600 will shrink to about $1,387. You may not miss that $213 a month right away, but over time, you might need that extra money in your monthly benefits.
2. You're not happy with your nest egg
It's one thing to reach the age of 65 with a nest egg you feel secure with. But if, come that age, you feel your savings could still use work, then it's worth plugging away at your job for a few more years.
Imagine you have $300,000 in your IRA or 401(k) plan by age 65. That's a decent sum, but not a ton of money when you consider how long you might need it to last.
If you were to keep working another two years, all the while socking away $500 a month, and your retirement plan delivers a somewhat conservative 5% return during that two-year period, you'll end up with $343,000 instead of just $300,000. That's a pretty substantial difference.
3. You enjoy your job
If you hate your job and, worse yet, feel that it may be detrimental to your health, then it's natural that you'd want to leave it come age 65. But if you actually enjoy going to work, then you might as well keep at it a few more years.
Americans are living longer these days, and if you retire in your mid-60s, you could end up with many years of retirement ahead of you. And while you can argue that that's not a bad thing, it could end up putting a strain on your nest egg. So if your job is actually something that keeps you busy and engaged, then it pays to stay on-board a few extra years.
Tempting as it may be to retire at age 65, there are plenty of reasons to stay in the workforce longer. If any of these apply to you, it pays to consider holding off on retirement until your late 60s -- or possibly even beyond.
