As the time to retire arrives, some of my clients face a question: “Should I retire now or work just one more year?”
This decision carries enormous weight, both financially and personally. Meet Rob and Natalie, a couple I’ve been working with in this situation.
Retirement Crossroads
Rob and Natalie, ages 66, had built a solid financial foundation over their careers. They had accumulated $1.35 million across their retirement accounts and owned their $970,000 home outright. Their retirement vision included spending about $9,000 monthly: $6,500 for essentials and $2,500 for the extensive travel they’d been dreaming about for years.
But there was a problem. Rob had been experiencing increasing back pain from his corporate job, and Natalie was feeling more stress from her job after a recent company reorg.
They were eager to start checking destinations off their bucket list while they still had good health and energy. But at the same time, they were feeling anxious about their ability to spend the way they had planned during retirement, especially as prices for everything around them has been rising dramatically since the pandemic.
One More Year?
When we took a closer look at their situation, we assessed all the areas in their finances and retirement projections and savings.
One alternative we also explored was working one more year, as this would come with some financial advantages. For instance, their retirement portfolio would have an additional year to grow before they started withdrawals.
With their current savings rate, they could add approximately $75,000 to their nest egg. And Delaying Social Security would increase their combined monthly benefits by about $500.
Our analysis showed that retiring immediately gave them an 85% chance of maintaining their desired lifestyle until age 90. Not too bad, but not as secure as they wanted. Working one more year would boost that probability to 94%.
Costs of Delaying Retirement
But numbers only tell part of the story. During our meetings, Natalie mentioned her close friend who had delayed retirement for “just one more year” twice, only to be diagnosed with a serious illness shortly after finally retiring.
This led them to think, “what’s the point of having more money if we don’t have the health to enjoy it?”
And this is the overlooked side of the retirement equation. While working longer can improve your financial outlook, it also comes with opportunity costs that don’t show up on paper:
- Precious time with family and friends
- Pursuing passions while you have good health
- Reduced stress and improved wellbeing
- Freedom to set your own schedule
So, we explored alternatives that could improve their financial security without delaying retirement. For example, we adjusted their spending plan to reduce travel expenses after age 75, as it’s likely their travel interests would change later on. This simple adjustment increased their probability of success to 91%.
We also discussed their home as a potential source of future funds. While they had no near-term plans to downsize from their house, knowing they had this significant asset made them feel more secure.
Lastly, we outlined a more tax-efficient withdrawal strategy, which would save them thousands in taxes over their retirement years.
After weighing both the financial and personal factors, they made their decision: they’ll retire now rather than work another year.
Final Thoughts
While working longer almost always improves your financial picture, the right choice depends on your unique situation.
Retirement planning isn’t just about maximizing wealth–it’s about creating the life you want with the resources you have.
Are you ready to retire with confidence?
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