Popular Ways To Delay Retirement

By Mark P. Cussen, CFP®, CMFC, AFC | February 13, 2013 AAA

A large percentage of older American workers have sustained substantial investment losses in the stock and real estate markets in the past few years. A poll of 1,500 people conducted by Wells Fargo showed that, on average, the respondents had saved only a dismal 7% of what they felt they needed in order to retire comfortably. Many pre-retirees have therefore decided to postpone their retirements for a few more years until their nest eggs have recovered at least somewhat. There are a few different ways that people are choosing to delay retirement, depending upon their circumstances and objectives.

Keep Those Job Fires Burning
The most obvious solution for those who are delaying retirement is simply to continue working at their present jobs for a few more years. Doing so can allow workers to replenish their retirement savings in many cases, as a greater amount of earnings can be deferred into IRAs and employer-sponsored plans. But not all employers are sympathetic to the economic plights of their older workers, and it is often in the company's best financial interest to jettison their most experienced workers and replace them with younger workers who will command lower salaries.

Other Options
Those who are not lucky enough to keep their current full-time jobs have a few alternatives. Some employees may be able to continue working part-time at their present jobs, while others who are laid off may be able to find work as consultants or independent contractors with their former employers. If none of these options is a possibility and similar work is not readily available with another employer, then it may be time to explore a temporary career in another field. Workers who are laid off and facing retirement should examine their passions and hobbies and see if there is a job available in one of those fields. Although changing careers can mean taking a pay cut, the new job may at least provide a level of emotional satisfaction that the worker did not have in his or her previous job.

The Social Security Factor


Those who are unable or unwilling to work may have another alternative available if they are at least 62 years old. If they begin taking early Social Security distributions, then they may be able to get by without having to find another job. Their incomes will most likely decrease, but this option may be more palatable than putting in the same amount of effort for a new employer for substantially lower compensation. And combining early Social Security income with part-time or consulting work may allow some people to maintain a stream of income that resembles their previous level of earnings. This strategy can also give the worker's retirement portfolio time to recover from previous market losses and may even allow for additional contributions for those who are adept at budgeting their money.

However, taking Social Security benefits early comes at a price. The benefits will only be 75% of what they would be if the participant waited until he or she reached full retirement age. Those who are able and/or willing to keep working may be wiser to do so until age 70, when they can receive the maximum possible monthly Social Security benefit. For workers who have sustained heavy losses in the markets, this option may be the safest way to replace some of the income that they can no longer generate from their savings.

The Bottom Line
These are just some of the choices available for those who wish to delay retirement. The right path for each person will depend upon several factors, chief among them their risk tolerance and willingness and ability to continue working. For more information on how to effectively delay your retirement, consult your human resources department or financial advisor.

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