Social Security Benefits: The Pros and Cons of Not Retiring at Retirement Age

By Jonathan Peterson

Copyright © 2015 AARP

Suppose early retirement isn’t for you. You’re not ready for Social Security, and you want a few more years of a steady paycheck to make sure that you’ll end up with the lifestyle you want in retirement. You have skills to offer, and you know how to be a good worker.

By taking this path, you potentially bolster your resources for the long term and win a bounty of peace of mind down the road, when you finally do choose to stop working. At this point, you have a clear sense of how your wages can fit into a life plan. You may be following a smart, forward‐looking strategy.

You probably have more opportunity to save than when you were younger, and you may be less inclined to waste money on forgettable purchases. The future is getting a lot closer, and you’re thinking about it. But be prepared — being an older worker isn’t always a picnic.

Facing the challenges of working later in life

Older workers sometimes run into obstacles that make it a lot harder to earn a living, and there’s no point in denying it. If none of these challenges comes your way and your path turns out to be a breeze, all the better.

Age discrimination

Age discrimination is a lurking, often subtle reality in many workplaces. Employers may see older workers as costly because of healthcare costs and wages. They may view you as wary of new technology, or they may assume you’re ignorant about it.

In a weak economy, companies often offer buyouts to cut costs, a perfectly legal strategy. But older workers may feel that if they don’t grab a buyout, they’ll get pushed out the door anyway, with no payoff.

Older job applicants sometimes complain that potential employers rule them out as “overqualified” or as not likely to stay in their jobs very long. When an older worker is laid off, it takes much longer to find a new job than it takes a younger worker to find one. The number of age‐discrimination complaints filed with the Equal Employment Opportunity Commission (EEOC) has risen in recent years, as aging Baby Boomers have often struggled with layoffs in a weak job market.

Unexpected events

Surveys of retirees have found that 40 percent or even more feel that they were forced to retire before they expected to. Older individuals cite various reasons that they hang it up earlier than planned, including layoffs, a company (or job) relocation, an employer going out of business, and reduced demand for their skills.

Health problems

Chronic health issues become more common the older you get. Among people over 50, for example, four out of five have at least one chronic health condition. That’s more than 70 million people. Moreover, older workers may face a difficult conflict between the demands of the workplace and caregiving for an ailing spouse.

An unsteady job market

Your ambition to stay in the workforce may be rewarded with a job that is below your expectations. You may like your current job, but you may not be able to keep it. On top of that, continual restructuring by U.S. businesses adds instability to many jobs. New technologies, changes in management priorities, or an economic downturn can all heighten job pressures and prompt an unexpected layoff.

Youthful co‐workers

You may face a big age gap between yourself and your colleagues, some of whom may be young enough to be your children. Perhaps some of these “kids” make more money than you do and have more influence. Maybe one of them writes your performance review. You have to deal with it. And don’t forget that your youthful boss may feel awkward about giving you orders or criticizing your work.

As an older worker, use your maturity to keep relations easygoing and stress free.

Reaping the benefits of working later in life

So much for the challenges. You may have very good reasons to persevere in the working world. You could push up your monthly retirement income by one‐third if you retire at 66 instead of 62, according to scholars at the Center for Retirement Research at Boston College.

In large part, the reason is that your Social Security benefit grows if you delay taking it. In addition, you strengthen your long‐term security by adding to your nest egg and reducing the length of retirement you have to finance.

Working later in life can help you in other ways, as well. Here are some of the reasons, in addition to the incentives provided by Social Security:

  • Health insurance: Many employers offer health insurance, which can add up to thousands of dollars in annual benefits.

  • Workplace savings programs: If your employer offers a 401(k), you may benefit from some matching contributions, which build savings. If you’re over 50, you can make your own catch‐up contributions to a 401(k) ($6,000 in 2015). If your employer offers no plan, and you can set aside some money, you should put as much as possible into an individual retirement account (IRA). (In 2015, a $1,000 catch‐up was allowed for traditional IRAs beyond the $5,500 maximum contribution.)

  • Opportunity to save: For many people in their late 50s and 60s, the kids are out of the nest, the house is paid off, and the medical expenses that may be in store when you’re older haven’t hit yet. If you’re in this fortunate position, you have a window of opportunity to plow as much of your wages into savings as you possibly can to prepare for the long haul.

  • The chance to wipe out debt: Maybe you still have maxed‐out credit cards and a big mortgage. By preserving that income for a few extra years into your mid‐60s or even beyond, you can pay down your debt and strengthen your finances.