A report by the Conference Board has gotten a lot of attention as it suggests an increasing number of Americans are putting off retirement. The report focuses mainly on economic reasons.
The business group noted a huge spike in the number of 45 to 60 year-olds saying they planned to delay retirement -- from 42 percent in 2010 to 62 percent in 2012.
"It's disconcerting that the two years in which the U.S. economy seemed to finally, if fitfully, turn the corner also left so many more workers compelled to change their retirement plans late in their careers," said Gad Levanon, Director of Macroeconomic Research at The Conference Board and a co-author of the report.
Putting off retirement
Those who've experienced a job loss, salary cut, or significant decline in home price are much more likely to have plans for delaying retirement. Overall, the report sees this as a negative development for those involved.
Just the title of the report, "Trapped on the Worker Treadmill," is dark and gloomy. It makes the assumption that most employees hate their jobs and find getting up every day and going to work to be a "daily grind."
For companies, it can be a mixed blessing. It can keep an experienced work force in place a while longer but also hamper efforts to cut costs. Staff reductions normally carried out through attrition will now require more buyouts. It can also be an obstacle to younger employees just entering the work force.
Good reasons to keep working
While the report focuses on the negative aspects of delayed retirement, there are also some pretty good reasons to stay on the job, assuming you don't hate it.
For one thing it gives you more time to build your nest egg. Assuming the children are independent and your mortgage payment is low, along with the rest of your expenses, your 60s are an opportune time to sock money away.
The longer you work, the fewer years you will be dependent on your retirement savings. By law you are not required to being withdrawing retirement funds until age 70 and a half. However, just because you are withdrawing the money from the tax deferred account, it doesn't mean you are required to spend it -- you just have to pay taxes on it.
Reduced benefits
The longer you can put off drawing Social Security, the larger your monthly payments will be. If you start your Social Security benefits at age 62, you will permanently reduce the amount of money you will receive by as much as 30% than if you had waited just four more years till the normal or full retirement age for most baby boomers.
If you don't think you can put it off to age 66, there is still an advantage to postponing it as long as possible. With each year between 62 and your full retirement age of 66 or 67, the reduction in your benefits is not as great.
If you are married and you expect your benefit to be higher than your spouse's, you should probably consider waiting. If you die first, you spouse has the option to receive your monthly amount if it's higher than his or her own. The benefit payments, however, will be less than they could have been for the rest of our spouse's life as a result of you opting to take early benefits.
Tax implications
Receiving early benefits also has important tax ramifications. If you plan to work in retirement and have a good income, there's a tax penalty on Social Security benefits between age 62 and 66. After age 66, you can earn as much as you want without affecting your benefits.
If you have group health coverage provided by an employer, you might think twice before giving that up. At age 65 you can begin Medicare coverage, but until then, you'll probably need some kind of coverage. Getting individual coverage is very expensive.
Another thing to consider is your social life. Many people don't realize it but work is a huge part of their life, especially if they have been with one employer for a long time. You may get tired of your co-workers from time to time, but decide if you are ready to end those daily relationships and how you will replace them.
Finally, think about what you expect from retirement. What, exactly, are you going to do with your time? A 2001 survey by SunAmerica found a majority of respondents said they planned to work in some capacity in retirement. For many, working at a job you enjoy isn't really work.
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