Delaying Retirement Just 6 Months Can Yield an Extra $50,000. Here’s How.
Working just six extra months can boost your retirement savings by tens of thousands of dollars. Here is the math behind delaying retirement.
At last check, Americans think they need $1.46 million to live comfortably in retirement. If you are among the millions who are getting closer to retirement but don’t think you have enough money saved, don’t despair. There are ways to shore up extra cash; one powerful way is to work longer.
That doesn’t mean you have to keep working for an extra five years or even a decade. But even six months or a year can have a meaningful impact on your retirement nest egg.
“Retirement is a twenty-year horizon, and essentially what you are doing is prioritizing your future by working six months longer,” says Nick Nefouse, global head of retirement solutions and head of LifePath at BlackRock.
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“Six months longer means you are saving for six more months, deferring Social Security for six months and deferring drawing capital for six months.”
The same triple benefit applies to nine months, 12 months or more. Time allows you to amass more money for when you do retire.
How working longer impacts Social Security
When it comes to spending money in retirement, income typically comes from several sources, including Social Security benefits, pensions, a 401(k), IRA, or other tax-advantaged retirement accounts. You can also tap investment accounts and any income from part-time jobs like consulting gigs. The timing of your retirement will impact all of those buckets differently.
Take Social Security. While you can begin collecting benefits at 62, the longer you wait, the bigger your monthly check will be.
- If you begin collecting at 62 (the earliest age possible), your benefit is reduced by 30%.
- If you collect at your Full Retirement Age (FRA), typically around 67 depending on when you were born, you will receive your full benefits.
- If you collect at 70, you will receive a 30.7% increase in your benefits compared to FRA.
If you are on the cusp of hitting your FRA (meaning you are around age 66 in most cases), delaying for six months, nine months, or a year will result in a 30% boost in your benefits.
If you are at your FRA and delay retiring for even six months, it can mean bigger payments when you begin collecting. That’s because your Social Security benefits are calculated based on your 35 highest-earnings years, adjusted for inflation. If you are at your peak earnings and hold off, that’s more months calculated into your earnings.
“Any timeframe — if it's six months, nine months, a year — you continue to work, not only is it additional time to save for retirement, but it could help put off taking Social Security,” says Sharon Carson, executive director of J.P. Morgan Asset Management.
“If you don’t have 35 years of earnings or you have some early years you weren’t paid very well, then [delaying] will help. A lot of people make more at the end of their career than in the beginning.”
How working longer can impact your retirement savings
The stock markets have been volatile this year, which has put a damper on many people's retirement nest eggs.
If you are thinking about retiring in a down market, working even six months longer can give you time to recoup your losses and then some. That was the case following the Great Recession and the COVID-19 sell-offs. Both times, the stock market more than recovered. But if you retire when your portfolio is posting negative returns, it can have a big impact on how much you can withdraw annually and how long your savings will last.
Waiting might help you avoid sequence of returns risk, which occurs when you experience negative investment returns early in retirement and are forced to take withdrawals. Doing this can significantly impact the lifespan of your retirement savings as it leaves less money to recover when stocks rebound. Sequence of returns risk is a concern in particular in the first five or 10 years of retirement. “The longer you are invested, the more the volatility will be smoothed out,” says Nefouse.
It's not just about avoiding the sequence of returns risk. When you work longer, you also benefit from the power of compounding. This occurs when the interest earned on your savings earns interest. The more time your money has to grow, the greater it will benefit from compounding.
Plus, the longer you work, the more time you'll have to access your employer's subsidized health insurance as well as other benefits such as life insurance, vision and even a gym membership. It also gives you additional months to pay off any lingering debt before you retire and save more in your retirement savings accounts. It also means fewer years you'll be drawing down your savings in retirement.
It also gives you more time to take advantage of catch-up contributions if you are 50 or older. For 2026, workers can contribute an additional $8,000 in their 401(k) and $1,100 in their IRA. That increases by an extra $3,250 if they are between the ages of 60 and 63. If you work six extra months, that's additional tax-advantaged income going into savings. By maxing out these contribution limits right before you retire, you're not only increasing your balance but also the compounding power of your nest egg.
How working longer can impact your happiness
Rewind a few decades, and retirement was a hard stop. You selected a retirement date, and after that, you began collecting Social Security, a pension and withdrawals from your retirement savings account.
These days, people tend to take a phased approach to retirement. They may slow down and stop working sixty hours a week, but that doesn’t mean the paycheck ends entirely.
You could stop working overtime, reduce your hours, move to part-time work, consult, or freelance. While you may not be working as much, you’re still bringing in income, which prevents you from drawing down on your savings. It also buys you time to figure out what you want to do with all the free time you'll have and plan for your passion in retirement. “If you have the ability, working longer is both financially good and mentally good,” says Nefouse.
How much can you save working six months, nine months and a year longer
Still not convinced? Here’s how much you save by working longer assuming:
You are 67, have $500,000 in your 401(K) returning 5% annually, earn $150,000 per year, contribute 10% of your income to your 401(k) and if you retired today would receive $2,400 in monthly Social Security benefits.
Waiting six more months
401(k) would increase by $22,613
Social Security would increase by $576 per year
Waiting nine more months
401(k) would increase by $34,003
Social Security would increase by $1,728 per year
Waiting 12 more months
401(k) would increase by $45,450
Social Security would increase by $2,304
Three financial moves to make in the months before you give notice
If you do plan to work six to twelve months longer, there are steps you can take during the period to reap as much of the benefit as possible, including the following:
Automate the extra income: Immediately divert a portion of your salary into your 401(k) or high-yield savings account so you aren't tempted to spend more because you are still working.
Pay down any high-interest debt: If you still have any high-interest debt, now is the time to get rid of it. Use your paychecks to wipe out lingering credit card balances, personal loans, or auto loans so you enter retirement largely debt-free.
Test your retirement budget: Try living off the money you expect to have in retirement during the final six months to make sure it's doable. If it's not, you may need to adjust your lifestyle or consider working longer.
Is waiting right for you?
Whether you work a few months or retire as planned depends on your finances and mental and physical health. Carson says to ask yourself a series of questions to see if you are ready.
Do you have a plan that makes you feel financially secure? If yes, then are you ready psychologically? Do you have a plan for what you’ll do in retirement? If you do, then retiring is a no-brainer.
But if you answer no, ask yourself what you can do to adjust your lifestyle to make you feel more secure.
If working a few more months or a year is the answer, go for it; you’re nest egg will thank you.
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