As more Americans are facing a retirement with inadequate savings or pensions, some are choosing to delay retirement past age 65—and some research has shown working longer could pay off financially. However, critics aren’t sure this is the best route to extending or building your retirement savings.

A study conducted by researchers from the Stanford Center on Longevity and the Society of Actuaries, which was released in 2019, found that retiring later is beneficial. The report states that “delaying retirement, even for a few years, can significantly increase the eventual retirement income.”

Researchers looked at 292 strategies for building retirement income and found the most effective to be delaying Social Security payments until age 70. The longer someone can wait to draw down their retirement and postpone Social Security payments, the more retirement income they’ll have, according to the report.

Here’s what proponents of a later retirement—and their detractors—say about putting off retirement and working longer.

work gloves

The pros

More savings: While logic says that the more years you work, the more time you’ll have to save, there may be additional benefits to putting off retirement until age 70. Working in the second half of your 60s could be a time of higher earnings than in the past, and you may be able to save more if you’re old enough to have paid off your children’s college tuition, your mortgage, or your car loan. This could leave you with more money to put away for your impending retirement.

The rules for IRAs also benefit older workers. People who are working and age 50 and older can make catch-up contributions to their retirement accounts, allowing them to save more in their IRA or 401(k) at a time when their earnings are high: up to $26,000 annually in a 401(k) and $7,000 annually in an IRA. If you work for a company that matches IRA savings, you’ll add some free savings to your growing retirement contributions.

Some research backs this strategy. According to the Center for Retirement Research at Boston College, 86 percent of people who work until age 70 will be financially comfortable in their retirement.

Expanded Social Security benefits: Current rules allow workers to retire at age 66 or 67 and receive their full Social Security benefits. While claiming Social Security is allowed as young as 62, some experts say that working a few years past official retirement age can reap substantial benefits.

For example, your payments will increase by 8 percent for every year you are eligible for Social Security benefits but don’t take them. This incentive ends when you are 72, the required minimum distribution age, but let’s say you wait until age 70 to retire. Here’s how it would work: If your monthly benefit is $1,500 and your full retirement age is 66, waiting until age 72 to claim Social Security would increase your monthly Social Security payment to $1,980—a lifetime benefit.

Fewer retirement years to fund: According to the Social Security Administration, people are living longer, which means they will face a longer period of retirement. The agency estimates that men who are 65 will live, on average, to about 84 years, while 65-year-old women will live on average to almost 87 years. About one-fourth of all people who are 65 years old will live past 90.

As life expectancy lengthens, so does the expected period of retirement. That means that working a few years gives you more time to increase your savings without spending it and decreases the number of years your retirement savings will need to provide an income. Here’s an example: At age 65, say you have saved $500,0000. If your savings earn a 4 percent annual return (a conservative amount), when you are 70, your savings will have grown by about $62,000.

70 is the new 60? If you are generally in good health, putting off retirement until you are 70 shouldn’t be cutting into your remaining years of health. Modern medicine and life expectancy rates mean you that you likely will have many years after age 70 to enjoy your retirement.

In addition, working a few more years might actually be good for your health. Researchers have found that working keeps you physically and mentally sharp, and one study even concluded that people who work longer might live longer, too.

 

Cons

Some financial experts, however, disagree that 70 is a better age to retire. Many people retire in their early to mid-60s because of health reasons, or they are pushed out of their job and don’t have the option to work longer. Some simply don’t enjoy their job and don’t want to spend their sixties unhappy in their employment.

Considering a later retirement is fine, but don’t bank your savings plan on it by waiting until you’re 60 to start seriously saving. The earlier you can put away money, the better. This will help you build a retirement savings that will allow you to retire when you want—regardless of your age.