For decades the traditional retirement age was thought to be 65 years old but, in the last few years, that thinking has changed dramatically. Many people are now working well into their late 60s and even into their 70s, and for good reason; the longer a person waits to fully retire, the more wealth they can build and the more security they will have when they stop working completely.
There are, to be sure, a large number of excellent reasons to keep working past the traditional retirement age, including the fact that social security payments increase substantially between the age of 62 and 70 (if a person doesn’t start collecting them). Also, consumers with a 401(k) who don’t use the funds in these retirement accounts until they hit the age of 70 will have significantly more money available to them then consumers who start using those funds earlier.
Someone who decides to retire at age 70 will have eight more years of contributions that go into their 401(k), eight more years of returns on the investment sitting in that account and eight more years to let compound interest work it’s magic.
Also, living expenses typically tend to drop when a person reaches their 60s and 70s (extra costs for healthcare a side) making the decade between 60 and 70 years old one of the best for putting a lot more money into savings and retirement accounts.
The actual numbers are different for every consumer, of course, but the substantial amount of extra savings, interest and revenues that’s a consumer will be able to put aside by putting off retirement for only eight years are significant. In fact, they can be the difference between having too little money to retire at a particular lifestyle and having enough to do it comfortably.
Another reason to put off retirement is simply this; once a person retires, it’s much more difficult to get back into the workforce in any way, shape or form. If you think finding a job in your 40s or 50s is difficult, try doing it in your 60s or 70s. We’ve all heard of sexism and racism but, at that age, most people will also be introduced to ageism, or the bias against someone because of their age.
In the end, continuing to work for approximately 20% more of your life could add 70, 80, 90 or even 100% more to your retirement funds. Studies have also shown that people who work longer actually live healthier lives because they’re more engaged, use their brains and bodies more, and feel as if they are still a big part of society and still “matter”.
If you have questions about retirement, retirement savings or personal-finance questions in general, please send us an e-mail or leave a comment and we’ll get back to you with advice and answers.