This post Could Retiring Later Make You Live Longer? appeared first on Daily Reckoning.
If you ask most people when they’d like to retire, they’ll tell you ‘yesterday.’
However, there’s an interesting argument to be made for delaying retirement just one more year.
According to the Employee Benefit Research Institute, the number of workers reporting that they expect to work past age 65 rose from 16 percent in 1991 to 48 percent last year.
It seems like more workers are getting the message that in order to boost their retirement security they need to work longer.
But boosting your retirement nest egg is not the only benefit to delaying retirement. In fact, I’ve got six reasons why putting off retirement just one more year is not such a bad idea.
Reason 1: You’ll Live Longer
It’s counterintuitive to think that working a stressful 9-5 job will increase your chances of living longer but that’s the truth.
The Center for Retirement Research found that delaying retirement reduced the five-year mortality rate for men in their early 60s by 32%.
Another study of half a million retired self-employed workers in France found that dementia was significantly less common among those who retired later than those who retired earlier.
Researchers hypothesize that the reason why early retirement has such negative effects on the brain is due to a decrease in mentally challenging tasks.
Reason 2: You’ll Save More
The longer you work, the more time you have to save for retirement. And, as you get older, the opportunity to set aside even more money increases.
Here’s how: If you’re under 50, your contribution limit to a 401(k) is $19,000 and $6,000 for an IRA this year. But, once you’re older than 50, you can add an extra $6,000 and $1,000 to your 401(k) and IRA contribution limits, respectively.
On top of that, the money you have saved and invested gets a chance to grow one more year without you touching it.
For example, if you have $500,000 in a retirement account today by delaying just one year, that $500,000 could grow to $535,000, assuming a 7% annual rate of return. And that’s not including any additional contributions you make to your retirement accounts during that time.
What can you do with an extra $35,000? That leads us to my next reason…
Reason 3: You’ll Have a Better Quality of Life
The reason why your quality of life will improve if you work just one more year is due to the fact that your retirement will be one year shorter.
If you estimate your yearly expenses in retirement to be $35,000, then delaying just one year lowers your required savings by that same amount. Couple that with an extra $35,000 from compound growth and you now have an extra $70,000 to spend how you please.
Reason 4: You’ll Have Bigger Social Security Checks
If you delay retirement, you boost your Social Security benefits in two ways.
First, it’s likely that you’re at the peak of your earning potential so because your Social Security check is based on the average monthly income …read more
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