Delaying Retirement, But Not Your Retirement Dreams
Many investors today who had planned to retire early at 62 when they became eligible for Social Security benefits—albeit at a reduced rate compared with retiring at full retirement age—are discovering that those benefits, combined with their retirement savings, cannot support the lifestyle they expected or provide the financial cushion in retirement they desire.
Often, they are disappointed to realize they may have to continue working and saving for several more years to catch up. This strategy leaves preretirees in transition with a choice: retire early with insufficient savings and income or delay their retirement dreams until after they retire.
For some preretirees there may be another, more desirable option. An analysis by T. Rowe Price demonstrates that, if those in their early 60s decide to keep working, but discontinue making contributions to their retirement plans—spending that money instead—they can start fulfilling some of their retirement dreams sooner and still be in a stronger financial position down the road.
This new transitional strategy involves working longer, but it can provide more discretionary income during transition years to start seriously pursuing your retirement aspirations well before you thought you could.
And by continuing to work and delaying receipt of Social Security benefits, you are positioning yourself to have potentially higher payments—adjusted annually for inflation—for the rest of your life. This strategy can be much more positive for those in transition.
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