How to Avoid Delaying Retirement

Lately, retirement savers have become increasingly anxious about having enough income to last them their lifetime once they’ve retired. It's a valid concern, for three reasons:

  • Today's retirees are living longer: In 1940, an individual in the U.S. who was age 65 could expect to live another 15 years. But by 2011, that remaining life expectancy had increased to almost 20 years.1
  • Many individuals have little or no money set aside for retirement—and many are not saving for retirement at all:
    • The percentage of workers who said they have less than $10,000 in savings and investments was 46% in 2011, a slight increase from the 43% reported in 2010, according to the Employee Benefit Research Institute's (EBRI) annual Retirement Confidence Survey. That excludes the value of primary homes and defined benefit pension plans.2
    • Workers who said they had less than $1,000 in savings and investments rose to 29%, from 27% in 2010.2
  • The percentage of workers “not at all confident” about having enough money for a comfortable retirement grew from 22% in 2010 to 27% in 2011, the highest level measured in the 21-year history of EBRI survey.2

From a retirement planning perspective, today's longer life expectancies and inflation—including the ever-rising cost of health care—mean that your assets will have to last longer. Consequently, many individuals today are actually considering delaying retirement.3 This may be a viable option for those who wish to slow the pace at which they'll deplete their retirement savings—but with the proper planning, delaying retirement doesn't have to be something you’ll need to do.

Make the Right Move Today: Increase Your Contributions

One of the smartest moves you can make to help yourself avoid having to delay retirement is to increase the amount you contribute to your retirement plan. And it doesn’t have to drastically impact your budget. In fact, some retirement savers find it easy and convenient to make small contribution increases at the same time every year—such as when their birthday or their annual performance review rolls around.
Making small increases to your retirement account on a regular basis can have a real impact on your retirement income. To learn more, visit The Importance of Your Contributions.

The Advantages of Delaying Retirement

If you should find that, despite your best efforts, delaying retirement is your only option, there are some advantages to this choice, including:

  • Your ability to continue contributing to your retirement account:
    • If your contributions continue, you will potentially increase the amount available to you when you do begin withdrawing money from your account.
    • Since you’ll be waiting longer to tap into your retirement account, your money can grow longer on a tax-deferred basis.4
    • Your contributions reduce your taxable income because income taxes aren't assessed on contributions until your money is withdrawn from the plan.5
  • Needing to withdraw money over a shorter period of time: Your retirement savings won't have to last as long, so your money can go further.
  • A larger Social Security check: The Social Security Administration entitles you to an increased amount in benefits for each year you wait to claim them—up until age 70. If you retire at any time between age 62 and your full retirement age, your benefits are permanently reduced (relative to your full retirement benefit) by a fraction of a percent for each month before your full retirement age. But the reverse is also true. Waiting to collect your benefit until after you’ve reached full retirement age will result in a larger Social Security benefit, as you’ll see a slight increase in your check for each month you delay your retirement (until age 70).

As You Approach Retirement…

It’s a good idea to carefully estimate how much money you will need in the way of retirement income—and for how long. You may also wish to visit Develop a Tax-Smart Withdrawal Plan, which offers some helpful ideas on how to devise a withdrawal strategy for your retirement income.

Need personal assistance?
If you need help in determining what may make the most sense for your situation, contact your financial professional or a Prudential Retirement® Counselor. Simply dial 1-877-PRU-2100 and say "Retirement Counselor." A certified Prudential Retirement Counselor* can assist you Monday through Friday, from 8 a.m. to 6 p.m., ET.

The bottom line is this: Delaying your retirement may be a necessity for some, but with the right planning today, you can give yourself more choices concerning your target retirement age—while helping to ensure that you’ll have a more financially secure retirement.

*Many of Prudential Retirement’s Personal Retirement Services Retirement Counselors carry the distinct designation of Certified Retirement Consultants, an advanced certification available through the International Foundation for Retirement Education (InFRE). Certification includes mastery of retirement plan design, investment strategy, retirement income management, and retirement readiness and counseling.

1 Source: SocialSecurityOnline, Press Office Fact Sheet, Social Security Basic Facts, July 25, 2011.

2 Source: 2011 Employee Benefit Research Institute ”Retirement Confidence Survey.”

3 In the 2011 Employee Benefit Research Institute survey, 36% of respondents indicated that they expect to retire after age 65—up from 16% in 2001.

4 Applies only to those investment earnings related to contributions you made to your account on a before-tax basis.

5 Applies only to those contributions made on a before-tax basis.


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