Considering rampant inflation, market volatility, and a potential recession on the horizon, you’re not alone in thinking about delaying retirement. Doing this can give you more time to save and increase your odds of remaining financially secure as you age. But delaying retirement isn’t as simple as updating your last day of work on your calendar. You also need to take the following steps.
1. Determine your new savings target
Once you’ve decided on a new retirement date, make note of how much time you have left until then. Look up the current balance of your retirement accounts as well and recalculate how much you think you need to save for retirement. Use this information to come up with a new monthly savings target.
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Remember, delaying retirement shortens the length and cost of retirement, so you may not need to save as much as you’d originally planned to retire comfortably. But it’s always best to crunch the numbers again to make sure your savings plan is solid.
2. Reassess your investments
Take a look at your investments and decide whether they suit your new retirement timeline. If not, you may have to make some changes to maximize your growth potential.
For example, if you’re invested in a 2045 target-date fund but now plan to retire in 2050, you probably want to rethink that. Your current target-date fund’s glide path may have your investments growing too conservatively too quickly, forcing you to save more of your own money each month to hit your retirement goal. You may be better off switching to a 2050 target-date fund or choosing your own mix of assets that better suits your new retirement timeline.
3. Rethink your Social Security strategy
Delaying Social Security might make sense if you plan to delay retirement. Every month you wait to claim Social Security increases your checks until you qualify for your maximum benefit at 70. Delaying Social Security might also help you avoid the Social Security earnings test.
If you’re under your full retirement age (FRA) for the whole year and you claim Social Security while working, you’ll lose $1 from your benefits for every $2 you earn over $19,560. If you’ll reach your FRA this year, you’ll only lose $1 for every $3 you earn over $51,960 if you reach this number before your birthday.
Money lost to the Social Security earnings test isn’t gone forever. When you reach your FRA, the government recalculates your benefit and gives your checks a small boost to make up for what it previously withheld. But if you don’t need Social Security to get by, it’s often better to delay benefits until you quit working. You’ll probably get larger checks and possibly more money overall by doing this.
The obvious exception is if you plan to retire at 70 or later. There’s no point in delaying Social Security past this age because your checks won’t grow anymore. You may also choose to claim Social Security early if you have a terminal health condition.
You don’t have to change your Social Security claiming strategy — or any part of your retirement plan — at all if you don’t want to. But you should review it anyway to make sure you’re comfortable with it. This is a smart thing to do annually even if your retirement date hasn’t changed. It’ll help you monitor progress toward your goal and more easily course-correct if you find yourself going off track.
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