In the coming years, the U.S. workforce will undergo a pretty notable shift as baby boomers retire in droves. During the period from 2024 to 2030, an estimated 30.4 million Americans will reach the age of 65, an age often associated with retirement. And while, in one regard, that could open up opportunities for younger members of the labor force, it could also be the beginning of a major financial crisis among older folks.
More than half of Americans turning 65 between 2024 and 2030 (52.5%) have assets of $250,000 or less, according to a study commissioned by the ALI Retirement Income Institute. This means that many near-retirees are at risk of depleting their savings in their lifetime or otherwise struggling financially.
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If you’re nearing age 65 and are worried about the state of your nest egg, there’s one important move you can make that might salvage your retirement. And while it may not be the easiest choice to move forward with, it’s one you might appreciate for many years after the fact.
Come to terms with working longer
If you’re approaching retirement and have $250,000 or less to your name, you may be in for the world of financial upheaval. A $250,000 nest egg might seem like a lot of money until you apply the 4% rule to that balance, leaving you with an annual retirement income of just $10,000 from savings. And that assumes you even have $250,000. If you have half as much, your savings might only give you $5,000 a year.
That’s why it’s important to embrace the reality of your situation and consider a delayed retirement. If you were initially thinking of ending your career at age 65, delay that milestone until age 70. If you were going to work until age 67, hold off on retirement until 72.
To be clear, this advice shouldn’t apply to people whose jobs are truly harmful to their health. But if you’re not overwhelmingly miserable at work and can manage your job a few years longer, delaying retirement could work wonders for your financial outlook.
Remember, Americans are living longer these days, so ending your career in your early 70s could still mean having 20 years of retirement ahead of you. At the same time, you may be able to retire with more money if you delay your workforce exit by virtue of not only adding to your existing savings but also, just as importantly, leaving your nest egg untapped for a few extra years.
You might benefit from a Social Security standpoint
Delaying your workforce exit could also leave you with more Social Security to enjoy. You’re eligible to collect your full monthly benefit based on your individual wage history at full retirement age (FRA). If you’re turning 65 between 2025 and 2030, your FRA is 67. If you were born in 1959, it’s 66 and 10 months.
Meanwhile, your monthly Social Security benefit gets a boost for each year you delay your claim beyond FRA up until age 70. So, if you’re entitled to $2,000 a month at an FRA of 67, working until age 70 and claiming benefits then will boost your monthly payments to $2,480. That’s an extra $5,760 a year in Social Security to help make up for a nest egg that may not be so robust.
If you’re nearing age 65 with plenty of savings then, by all means, retire when you want to. But if you know your nest egg still needs work, do consider postponing retirement to some degree. If you can only hold off for an extra year, so be it. And if you can wait a bit longer, you may find that instead of retiring under financially precarious circumstances, you’re able to retire with more financial confidence.
