Investing

A Changing Definition of Retirement Age

Rather than stepping away from the workforce as that 65th birthday approaches, a growing number of professionals are doing the opposite.

by Rachel Hartman - September 16, 2019

The definitions of retirement and retirement age seem to be changing. The majority of working Americans ages 50–64 plan to work beyond age 65, according to a 2018 Gallup poll.

For those able to delay retirement for a few years, options may include continuing to work at your current organization full time, stepping into a part-time position, looking for seasonal work, or even trying out a new career.

Regardless of the type of job you choose, staying employed longer can create notable advantages—for your portfolio, future Social Security benefits, and overall health.

More time to build wealth

“One key benefit is the chance to continue to save longer for retirement,” notes Will Larson, Retirement Income Strategist for Wells Fargo Advisors.

You might be able to keep contributing to a 401(k) plan through your company. And using your current income to cover expenses allows you to delay taking disbursements from your investments, thus giving your portfolio the potential to continue to grow.

You also may save money on one of the biggest expenses in retirement: health care. Generally, you become eligible for Medicare at age 65. If you’re under age 65 and your employer provides your health insurance, you won’t need to purchase coverage on your own. “Continuing to work at least until age 65 can be a bridge to Medicare,” says Larson.

Certain perks, such as life insurance or dental benefits, might continue through your current employer as well.

Social Security implications

While most people can begin to receive Social Security benefits at age 62, waiting can bring several advantages.

  • Each year that you wait results in an increase in your monthly benefit until age 70. In most cases, if you work until your full retirement age (as defined by the Social Security Administration), you can expect your full benefit. And “if you delay to 70, you’ll get your highest benefit,” says Larson.
  • Social Security benefits are generally based on your highest 35 years of working income. “Later in your career, you’re likely earning a higher salary. Replacing a lower-earning year among those 35 years with a higher-earning year may increase your Social Security benefit,” notes Larson. Additionally, if you spent time out of the workforce at one point to raise a family or care for a relative, staying employed longer may also help increase your future benefit.
  • The best time to claim Social Security will depend on your particular situation. If you’re married, you’ll want to consider benefits for your spouse, as well. Sitting down with a financial advisor who can model different scenarios using a proven Social Security calculator can help you get a clear picture of how working longer can impact your future Social Security benefits.

A healthier outlook? 

Beyond the financial, there may be other benefits of extending your work life. Individuals working past age 65 may live longer, according to a 2016 study from Oregon State University. Researchers noted that factors such as social benefits in the workplace might lead to a longer lifespan.

Continuing to work may also help you stay mentally sharp. You might find meaning and purpose in your role, especially if you’re mentoring a younger member on your team.

However, workplace issues can sometimes harm your health—if a job is particularly stressful or physically demanding, for example, or if you feel it lacks meaning. Plus, you may not be able to choose a later retirement. According to the Gallup poll, retired Americans ages 50–64 report an average retirement age of 61. The takeaway: As you look at what’s next and right for you, staying flexible will help you to find a role that ideally fits your needs and lifestyle.

Rachel Hartman is a freelance writer who covers small business and personal finance topics. Her credits include Industry Today, MyBusiness Magazine, Bankrate.com, InsuranceQuotes.com, and many others.

Image by iStock

Additional Resources

Have you developed a plan for how you will generate the income you need when you retire? Learn more.

Explore these key considerations to manage rising health care costs in your retirement planning.