Why Delaying Retirement for Bigger Social Security Checks May Backfire
Brian J. O'Connor
4 min read
Working Longer to Max Out Social Security May Fail Most Workers
The idea of working longer before claiming Social Security benefits sounds like a great retirement strategy. Staying on the job means you can maximize your eventual benefit, continue to save for retirement and avoid tapping your investments to cover living expenses.
There’s just one problem: working longer is an unrealistic option for many. That’s the finding of the book, “Overtime: America’s Aging Workforce and the Future of Working Longer,” a collection edited by Lisa F. Berkman and Beth C. Truesdale, and published by Oxford University Press in 2022.
“Though today’s middle-aged adults are less financially prepared for retirement than today’s retirees, delayed retirement is not an adequate solution,” the editors write. “Precarious working conditions, family caregiving responsibilities, poor health, and age discrimination make it difficult or impossible for many to work longer.”
Working Longer to Max Out Social Security May Fail Most Workers
That conclusion is borne out by the Social Security Administration’s own statistics. While nearly 13% of workers nearing retirement say they’ll wait to claim the biggest possible payout, only 5% of people wait to claim benefits at age 70. Instead, about one-quarter of all men and one-third of all women opt to collect benefits as soon as become eligible at age 62.
Even worse, the administration notes that “[m]ore than one in eight of today’s 20-year-olds will die before reaching age 67.”
Nonetheless, financial advisers continue to promote the idea of waiting to maximize your benefit. On paper, it’s an idea that makes perfect sense: delaying your benefits from the full retirement age of 67 to 70 adds 8% to your benefit amount each year, a cumulative 32% increase in benefit cash. And, since Social Security benefits adjust with inflation, a bigger initial benefit means a bigger increase from the cost-of-living adjustments.
The Problem With Working Longer
Working Longer to Max Out Social Security May Fail Most Workers
As a 2022 report from the National Bureau of Economic Research noted, “Americans are notoriously bad savers. Large numbers are reaching old age too poor to finance retirements that could last longer than they worked.” The study concluded that “virtually all American workers age 45 to 62 should wait beyond age 65 to collect. More than 90 percent should wait till age 70.”
The idea makes sense and the “Overtime” editors agree. “Longer life expectancies mean that Americans need income to support more years of life, and working longer is a commonly proposed solution,” they write.
However, they cite five different factors that undermine the concept of working longer to boost retirement income, including “Trends and inequalities in American demographics, health, family dynamics, jobs, and politics,” which are often not factored in.
The editors outline an array of possible solutions. “Robust retirement and disability policies are essential complements to working-longer policies.” They add that, “Working-longer policies must be supported by ‘good jobs’ policies to succeed.”
Consider running your retirement strategy by a financial advisor for help evaluating your tradeoffs.
Bottom Line
Working longer and delaying retirement is a common strategy recommended to people who aren’t financially ready to retire. But a new book from Lisa F. Berkman and Beth C. Truesdale argues this alternative is unrealistic for many. Working conditions, caregiving responsibilities, health problems and age discrimination make it increasingly difficult for older Americans to continue to work.
How much money will you need to save to be able to retire? Should you delay Social Security? These are just a couple questions that pre-retirees face. A financial advisor can help you answer them. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Fidelity recommends that you have 10 times your annual income saved for retirement by age 67. To find out if you’re on track, try SmartAsset’s retirement calculator. This free tool will estimate how much you’ll have when the time comes to retire.
Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid -- in an account that isn't at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.
Are you a financial advisor looking to grow your business? SmartAsset AMP helps advisors connect with leads and offers marketing automation solutions so you can spend more time making conversions. Learn more about SmartAsset AMP.
