Imagine you’ve had a retirement plan in the works for years, even decades. You’re ready to retire in 2020… and then, something completely unexpected happens. A global pandemic.
There’s no denying that COVID-19 has changed our lives. For those nearing retirement age this year, the pandemic may have completely changed your plans. While deciding to continue working might be an emotional decision, there are plenty of benefits to extending your retirement date.
Continued Income and Additional Savings
Of course, the biggest benefit to delaying retirement is continuing to receive income. If you haven’t saved enough money to make you feel comfortable about enjoying your retirement lifestyle, continuing to work can help you reach your savings goals.
A SimplyWise survey from May 2020 found that over half of Americans are more concerned about retirement today, compared to how they felt about it a year prior. About 56% are worried that their Social Security funds will dry up before or during retirement. Almost half are concerned that they’ll outlive their savings. That same survey found that two-thirds of working people plan to continue working in retirement to ease those fears.
If you’re worried about income, delaying your retirement is a good strategy for building up your funds. Delaying your retirement, even for a few years can “significantly increase” your eventual retirement income.
Extending your working life means you have fewer retirement years to finance, plus more time to build up your assets. At this stage, you likely have fewer expenses or others who are financially dependent on you. You’re able to sock away more earnings toward your retirement savings.
Work on Your Terms
If you enjoyed working from home during quarantine more than you expected to, you’re not alone. A little over 60% of employed Americans worked from home during the coronavirus pandemic. Three in five American workers would prefer to continue working remotely as much as possible, once public restrictions are lifted.
When you postpone retirement, you may be able to work on your terms, whether that means working remotely, working flexible shifts, or transitioning to part-time or fewer hours. Plus, if you begin a second career, you can choose work that’s meaningful to you. Work based on your passions and hobbies will feel incredibly rewarding.
Tips for Delaying Retirement
Take stock of your expenses
Your retirement plan last year, or even at the beginning of this year, has likely changed in the wake of COVID-10. Make sure you take stock of any new expenses that have cropped up. Perhaps you’ve had higher medical bills, or you’ve had to adjust living expenses for your kids and family members. Even day-to-day expenses like utilities and groceries may have increased while in quarantine. Adjust for these changes when tweaking your retirement plan.
Delay Social Security and 401(k) withdrawals, if possible
You typically have to start making withdrawals from most retirement accounts the year you turn 72 years old. These mandatory withdrawals are called “required minimum distributions,” or RMDs. Check your 401(k) plan, however: you may be able to postpone RMDs without penalty until you retire.
Similarly, you can have the Social Security Administration suspend your payments until you turn 70 years old, when they’re automatically reinstated. Delay these payments now, and you’ll be able to receive a higher monthly payment later.
Have a backup plan
Before leaving your current job and jumping into a second career, take some time to think it through. The latest unemployment rate for May was 13.3%, a drop from April’s 14.7%, but still incredibly high. If you’re unable to secure a second career, can you remain at your current job with reduced hours? Do they offer contract work? Have a backup plan just in case.
Talk to a Financial Advisor at Guiding Wealth
One of the best decisions you can make when considering delaying your retirement? Speaking to a financial advisor. A trusted financial planner can work with you to adjust your retirement plan. They’ll help you figure out what actions you should take, and how those actions will affect your savings and lifestyle, now and in retirement. Speak to a Guiding Wealth financial advisor so you can start building a new retirement plan today.