Benefits of Delaying Retirement

While many people can’t wait to retire, others dread the thought of  retirement, and wonder what on earth they are going to do with their time. Then of course, there’s the worry that your financial provisions for retirement may not be adequate for your needs. These are some of the main benefits of delaying your retirement.

Claim delayed retirement credits (USA) or extra State Pension (UK)

By delaying your retirement, the amount of state retirement benefits you can claim will increase year on year. In both the USA and the UK, it’s possible to delay retirement until the age of 70 and receive increased benefits. No increase is applied after the age of 70, even if you continue to work. Delayed retirement credits can add between 3% and 8% to the sum you can expect to receive in the USA.

In the UK, for each 5 weeks you delay claiming your state pension, you earn an increase of 1%. While this may not sound much, it equates to an annual increase of 10.4% for every year you delay your pension claim. This can result in a big increase to your disposable income in retirement when you finally hang up your working clothes.

More chance for investments to grow

Any retirement investments you have could benefit significantly from having more time to grow. And if returns or interest rates are lower than you’d like, leaving your investments where they are for another year or two may give them chance to perform better – although there’s also the chance that returns could fall instead of rising. However, if some of your investments are in stocks and shares and the markets have had a bad year, delaying your retirement could give the stock markets a chance to recover.

As well as the fact that your investments will have more time to grow, your savings will not need to last quite so long if you delay your retirement by up to five years.  In addition, inflation will have less time to erode your spending power.

More money in your pension pot

If you work for longer, you can continue to contribute to private pensions or employer retirement plans, which means there will be a bigger pension pot when you finally retire. If your employer retirement plan features matching contributions from your employer, or if your pension is based on a final salary scheme, this can have a significant impact on your final pension pot.

Before deciding on a retirement date, it may be worth consulting and independent financial advisor (IFA) to assess your retirement requirements. Remember, whether you retire early, on time or at a later date, your retirement income may have to last you for twenty years or more, so you need to be sure that you can afford to retire when the time is right.