It is not unusual for people to wonder if they should wait a little longer before finally retiring. While one may choose to leave the workforce at 60, 62, 65, or at some other age that works for them, it is important to maintain some flexibility in the context of these plans.
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Here is a look at some signs that retiring one year later than you planned could actually work in your favor.
Three signs that you should postpone your retirement by a year
Here are three indicators that you should retire a year later than you planned, as listed by The Motley Fool:
- If you are still carrying some high-interest debt, you should reconsider retiring just yet. Any high-interest debt, like credit card or unsecured loan balances, could mean that you will end up having to spend a large chunk of your retirement income on it, leaving you financially stressed. On the other hand, if you wait a year before you retire, you might be able to chip away at more of your debt.
- You must reconsider your retirement plans if you are not old enough for Medicare. Healthcare might actually become one of your biggest expenses in retirement, and if you retire before you are eligible for Medicare – which usually does not happen until you are 65 – the cost of putting health insurance in place could become a huge issue. Waiting one more year to retire could help you avoid a gap in coverage. For instance, if you are 64 and stay employed and on your company’s health plan, you will potentially be able to move over to Medicare without having to buy insurance on your own.
However, even if that is not the case, waiting a year before retiring could still be beneficial. For example, if you are 62, it gives you a three-year gap until Medicare, as well as a three-year period where you may have to buy your own health insurance. However, if you work for another year and get health coverage through your job, you can avoid facing three years of premium costs, and face just two instead.
3. You must also postpone your retirement plan if you have yet to figure out when to claim Social Security, and wish to get more from those benefits. Retiring a year later could help if you do not have a claiming strategy yet, and it could even help you get more out of Social Security. For example, if you are 62, you can claim Social Security, but your monthly benefits will be reduced by about 30% compared to waiting full retirement age, which would be 67. If you work another year and wait on Social Security during that time, it could mean that you will face a 25% reduction in your monthly checks instead, which is better than 30%.