When turning fifty, many of us turn inward and ponder an impossible wish: If only we'd known the importance of stashing away a little bit more of our salary for the past 30 years. Not much at all, really. An extra percent each year would have yielded a sizable, perhaps even enviable, nest egg on which we could confidently support ourselves well past the age of retirement and into our golden years.
No doubt many people express this impossibility at the exact moment it seems all too late. A pity we can’t turn back the clock.
Or can we?
Actually, with a little focus and dedication, that prized egg can still be yours. According to a paper from the National Bureau of Economic Research, the solution revolves around working an extra three to six months. If maximized, the additional time on the job can yield a financial impact equal to saving that extra one percent over 30 years. Here are four reasons why briefly postponing retirement might be the key to your financial freedom:
- By working a little longer, you delay filing for your Social Security benefits. Every year you do that, your benefits increase by about 8% until age 70.
- The longer you work, the more you will contribute to your 401(k) or other workplace retirement plan, and more importantly, the more matching contributions you may get from your employer.
- Delayed withdrawals from retirement accounts result in additional compounding of untouched account balances.
- Delayed annuity purchases result in lower annuity prices.
The overall benefit is twofold: The longer you delay retirement, the more money you end up with when you do, and the less of it you’re likely going to need. Perhaps most encouragingly, it’s unlikely that you’ll have to incur a huge delay in retirement. As little as a year, or maybe even less depending on your unique situation, might be enough to supplement that missing piece of your retirement budget.
So don’t feel dejected, and certainly don't beat yourself up for being in a situation that millions of aspiring retirees find themselves in every year. No, you can't undo past expenditures. Instead, you can recognize that it’s not too late. In fact, if you start right now, you'll be well on your way to securing the retirement you deserve.