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How to decide if you should delay retirement

Sticking with your plan isn't necessarily the smartest move. Working a little longer could reduce financial stress and get you closer to your long-term goals.

By MSN Money Partner Aug 7, 2013 12:33PM
This post is from Scott Holsopple at partner site U.S. News & World Report.

USNews logoI have a buddy who was planning to run a marathon this summer.

He put in a lot of groundwork to build toward it. The training required sacrifice and dedication. Then he hurt his back and had to take it easy for a few months.
Senior with Laptop © H-Gall, Vetta, Getty Images
He's better now, but he made a really tough decision: He's delaying his marathon attempt for a year, rather than invite failure, injury and frustration. Between now and next summer, he's revamping his workouts and routine so he'll be able to run.

This makes me think of retirement planning and how people are delaying retirement. In fact, 34% of Americans are planning to put off retirement for a few years, according to a recent Deloitte study. Much like my buddy, people are deciding that a little more work may be just the ticket for success.

Do you have a date -- or at least year -- you're planning to retire? Do you wonder whether you can pull it off or if you'll need to delay? Take some lessons from my friend's marathon story:

Delaying isn't failing. Rather, you're putting yourself in a better position by applying lessons learned. My friend is changing his nutrition and workout routine; you might consider changing your contribution level, investments and how frequently you rebalance your account to maximize the time between today and your new retirement date.

You can't change what you can't change. My friend got injured, and that set him back in his training. Similarly, a market dip can set someone back in their retirement saving. Both cases call for a reassessment of your strategy, but dwelling on the setback isn't helpful.

Sometimes it's the journey -- not the goal -- that's the fun part. My pal's setback helped him to remember that he loves running -- a fact he'd forgotten when he was so focused on training. Likewise, you may enjoy working and be happier working a few more years. Healthier, too. A recent French study showed that people who delay retirement have less risk of developing Alzheimer's disease or other types of dementia.

So how do you decide whether it's appropriate for you to delay your retirement? Do an audit of your financial situation:
  • Decide what you'd like to do during retirement. Do you plan to travel or stay close to home? Do you anticipate relocating? Then estimate your monthly retirement budget. A general rule of thumb you can use is to plan on needing 70 percent of your pre-retirement income to maintain your current lifestyle. Depending on what you what to do in retirement, you may want to plan for more or less to better fit your goals.
  • Use an online retirement calculator to help you determine how much you need to save, given your investment strategy, to fit your monthly budget.
  • After crunching the numbers, if something doesn't add up, you'll have to make adjustments. You may need to change your current spending habits so you can afford to contribute more money to your 401(k)and other retirement accounts, reduce your expectations for retirement or delay retirement by planning to work longer.
If you decide that you should delay retirement, know that doing so, even for six months or a year, can be beneficial from three angles: (1) you're not drawing any money from your savings; (2) you can continue to contribute money to your 401(k) and receive an employer match (if available), and (3) your money has more time to potentially grow.
So you keep working, saving and investing; my pal will keep training, stretching and eating right. Sometimes, taking a step back can get us closer to realizing our dreams.

More from U.S. News & World Report:

Aug 7, 2013 2:08PM
Retire as soon as you can, don't follow lame advice to wait. You can't buy time and that's your most valuable asset. The government does not want you to retire early because you will not be contributing as much in taxes. The SS Administration wants you to retire later so that you don't tap into the money you already contributed. The Financial Advisors don't want you to retire early because they want more of your money. Look at the actuarial tables; retire at 55 and maybe get 30 years... retire at 70 and maybe get 15 years. I don't know about you, but I will hedge on the side of TIME. I am outa here in 4 months - Chow baby.
Aug 7, 2013 1:40PM
Why dont you guys stop writing articles that tell us we are screwed and maybe help target the government with some real reporting to maybe get them to stop stealing from us? So we might get a chance to retire - this daily dose of screw you - you can never retire is really getting old.
Aug 7, 2013 2:29PM
Cash in as soon as possible. I know too many people who died BEFORE they enjoyed any of the money they worked so hard for all their lives.
Aug 7, 2013 3:53PM
retire as soon as possible most hard working Americas kill over before they draw on it .don't be a greedy fool take what you can when you can and run like hell.go fishing hunting camping crusies do it all you worked hard now play hard and go out with a bang
Aug 7, 2013 3:31PM

I'm with Vudu13 and catdaddy1gg, I love my job but I don't want to do it until I die.  Vudu is right on all the points why we are told to keep working.  Death is not a fun way to retire or so it seems.


Aug 8, 2013 11:48AM
You should start to plan and save./invest for retirement early in life. Your plan should include the lifestyle you would like to lead and your associated cost/expenses can be estimated on your pre-retirement expenses unless your lifestyle will be radically different. If you do this and don't take unnecessary risks (get rich quick schemes, etc.) you should be in fairly good shape when you reach retirement. There are many sites that provide information on this. I recently found the site Retirement And Good Living that provides information on various retirement related topics including finances, health, retirement locations and more. Very informative.
Aug 14, 2013 2:41PM
For those of you getting ready to retire, the biggest risk is running out of money. Even though I'm a CFP® Professional, I believe that planners in general have been using unrealistic assumptions in the financial plans done the last 10-15 years. Specifically, many retirees are basing their ability to retire on the assumption that they will average 8-10% a year from their investments. But they haven't and now many risk the very real possibility of running out of money.

Another thought is that retirement doesn't have to be an all or none decision. Part-time work can extend the life of retirement income plan considerable while still freeing up time to pursue hobbies, etc.
Aug 8, 2013 7:55PM

I've thought about early vs 'on-time' retirement.  I have a couple of years in mind for earliest and early and then barely early. That clearly states where I am aiming.  I have a few requirements of myself before considering retirement - sort of milestones to reach in addition to contributing regularly increased amounts toward retirement...if not accomplished...move to the next nearest year. Funny how time seems to fade away faster and faster, so I see it as an ever-increasing-in-value commodity - and I'm very sure that I'll appreciate the gift of extra years of bliss that I'm working so hard to earn.

Before retiring early, I'll be certain I have a long record of living on what I believe will be my income per year. Several years of living with a paid-off mortgage will go a long way to helping me meet that goal and will also enable greater savings to help manage those early years.  I've accomplished the mortgage portion and have begun extra savings - minimizing the risk of tapping a 401k or IRA and allowing it to grow just a little bit more sans withdrawals. I'll also need to research and use care to account for medical insurance costs (there's a moving target!). No company pension, no company medical for life - does make the goal daunting, but knowing that makes it easier to plan.  Still aiming for the earliest date - I don't give in easily and would never want to disappoint my senior self. Might be disheartening for the kids as this plan is not designed to leave behind an obscene inheritance. It just needs to be the right amount and I can do that.

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