Chapter 11. How Working Longer Helps

Work in retirement? It might sound like a contradiction in terms, but remember that we're looking for ways to achieve financial security over a retirement that could last 20 years or more. One of the best ways to do that is to work just a little longer than you might have planned. Working for even a few additional years can pay a surprisingly large bonus.

Most people say they don't plan to retire until age 65 at the earliest, but this is one of those cases where words and actions don't match. More than half of Americans file for Social Security at age 62—the youngest age of eligibility. The normal retirement age (NRA) as defined by the Social Security Administration (SSA) is 66; but in 2005, 55 percent of men and 50 percent of women filed for Social Security at age 62, according to SSA data. Even more striking, just 10 percent of men and women waited until age 66 to file for their benefits.

Working until their NRA could have boosted income in retirement by a third, experts say. The reasons are simple:

  1. Working until your NRA means you won't incur the early-filing benefit reductions imposed by Social Security.

  2. During your additional working years, you can continue to contribute to your 401(k) plan, building additional balances that can be put to work in the market.

  3. Every additional year of income is a year in which you don't support yourself by drawing down retirement balances.

"The usual pattern has been to work forty years and retire for twenty," says ...

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