Work Longer

Five years ago, I wrote an article that warned not to place too much emphasis on the ability to work longer to fund retirement. The risk was abundantly clear: just because you want to keep toiling, does not mean that you will be able to do so. For some, there will be physical limitations and for others, there may not be a job. That’s why nudges like me encourage you to diligently save during your working years.

Of course if you are sandwiched between the obligations of kids and aging parents or find yourself in your fifties without enough banked, you have two other options: spend less in retirement and/or delay the age of retirement. The later is the focus of this column, because working longer can have a significant impact on your retirement years.  That's because a delay allows you to continue contributing to your 401K or IRA; it allows your savings and investments a longer time to grow; you avoid early withdrawals from your nest egg; and you can wait to file for Social Security retirement benefits, which results in a larger monthly check for the rest of your life.

A recent paper by the National Bureau of Economic Research confirms this common sense notion. Retiring at age 66 instead of 62, for instance, can increase a retirement standard of living by almost 33 percent. Hang in there until age 70 and your standard of living will improve by nearly 75 percent. The authors of the paper note, “The results are unequivocal. Primary earners of ages 62 to 69 can substantially increase their retirement standard of living by working longer. The longer work can be sustained, the higher the retirement standard of living.” Even working a few more months can increase retirement income by 2 percent!

Another key insight of the analysis is that as we get older, some decisions, like how much to save in retirement accounts going forward, become less powerful at changing the affordable retirement standard of living. “Saving an additional one percent of earnings, for instance, would affect the retirement standard of living much more at age 36 than at age 56.” And fretting about performance and cost of the investments inside of your retirement “diminishes with age since there are fewer years to enjoy the benefit of a lower cost portfolio.”

Steve Vernon, a consulting research scholar at the Stanford Center on Longevity and contributor to CBS notes that for middle-income workers (defined as those with less than $1 million in retirement savings), one of the most important decisions to make is “when to leave the paid workforce and whether to work part time for a period until full retirement.”

According to the Society of Actuaries, Americans who reach the age 65 are projected to live another 21 years to age 86, on average. If these same Americans reach age 86, their life expectancy would extend to age 93!

If you want a general idea of how long you might live, you can check out a couple of different resources. is a calculator that asks you 40 questions related to your health and family history, and takes about 10 minutes to complete. At the end, you will be asked to create an account to store your answers. (When I completed the survey, the result was 100 even!) You can also go to the Society of Actuaries Longevity Illustrator, which estimates the probability that you will live for a certain number of years, based on four simple inputs. In my case, there was an 86 percent chance that I will survive another 25 years.