Delayed retirement

Should I Delay My Retirement?

Business shutdowns triggered by COVID-19 pushed millions out of work and thrust the stock market into a sharp downturn in the spring of 2020. Fast forward to March 2021, Iowans are rethinking their near-term and long-term financial plans, including pushing back their retirement date. 

Retirement is something most people look forward to regardless of how much you love your chosen profession or how successful you’ve been. However, due to the global pandemic, nearly 68 million Americans are reconsidering when they’re going to retire, according to a recent Edward Jones survey

If you’re thinking of adjusting your own timeline, you might want to consider the pros and cons of doing so. Let’s explore them…

Arguments in Favor of Delaying Retirement

  • Reduced Social Security benefits. Arguably the most important reason to retire later is social security. The sooner you start to take Social Security, the lower your benefits will be. If you plan to continue working until your benefits reach their maximum at age 70, delaying your claim will result in greater monthly payouts. 
  • It will give time for the markets to settle. Giving the financial effects of COVID a chance to run their course and the economy a chance to heal can provide a clearer picture of both the potential income stream from your investments and the amount of income you’ll need to retire comfortably. 
  • Taking advantage of employer-benefits. Some people choose to keep working longer so they can hang on to their healthcare benefits – and there’s comfort in staying with benefits and providers that are familiar.
  • You can save more the longer you wait. If you keep working, you can continue to make significant contributions to your employer-sponsored retirement plan or your individual retirement account (IRA). Staying in the workforce means you might delay the start of Social Security benefits, which can significantly increase the amount of those monthly benefits.
  • Time to rethink your retirement goals. When you retire from your life’s work, you should also retire to a fulfilling new life. The pandemic has given many the time to discover what they really want out of life, and the chance to rethink their plans. If you’re not sure whether or not the retirement life you envision is within reach, delaying your retirement date could give you the clarity you need to make adjustments. 
  • An opportunity to try a new career. If you dream of switching fields or starting your own business, delaying retirement could give you the opportunity to get your new venture off the ground. 

Arguments Against Delaying Retirement

  • Retirement could lower housing costs. Your house is typically the biggest expense in your budget. Once you retire, you no longer have to live close to your workplace and can choose a more affordable area to reside in. 
  • Your investments shouldn’t deplete. Retirement isn’t a ‘one-and-done’ operation. The end of your full-time career doesn’t have to mean you stop earning, saving or investing. Your investments could be OK if you’ve followed a lifetime investment plan.
  • You can afford to retire. More time to travel, see family, embark on a new skill or hobby… retirement is meant to be enjoyed. So if you’ve planned correctly and feel you have saved enough, why not retire now? 

A Phased Retirement

Once you’ve reviewed the pros and cons of an early retirement, but neither option seems a clear “winner”, there are ways to potentially have the best of both worlds. 

Acting as a middle ground, you could speak to your employer about a reduced schedule and enjoy the possible benefits of working part-time whilst enjoying your time off. This is also known as a “phased retirement”. 

A phased retirement includes a broad range of employment arrangements that allow an employee who is approaching retirement age to continue working with a reduced workload, and eventually transition from full-time work to full-time retirement. It depends on your employer whether they offer this option and also what benefits a phased retirement they may offer. 

Develop Your Financial Strategy With an Advisor 

If you do have to fully retire earlier than you hoped, consider working with a retirement income advisor to revisit your savings, spending, and investment strategies. The advisors at Johnson Wealth and Income Management can help you make changes that could help you adapt to your new circumstances so you can enjoy your life without worrying about finances.

Whether considering an early, delayed on “on-time” retirement, contact us here today so we can develop a strategy that’s right for you.

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