Thinking of retiring this year? It’s best to weigh all options before committing to living off what you’ve saved for retirement. There might be more benefits to waiting until after 2025 to stop working.
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Here are some of the reasons experts believe that retiring in 2026 or later might be a better idea than calling it quits in 2025.
Increased Social Security Benefits
The year someone was born will dictate their full retirement age. If a person isn’t at that age yet, Tyler Meyer, certified financial planner and the founder of Retire to Abundance, recommended holding off until they are to get higher Social Security benefits.
“By waiting to claim Social Security until after your full retirement age — up to age 70 — your monthly benefit grows by 8% per year,” he explained. “This can add up to a significant boost in income over time, especially if Social Security will be a major source of your retirement income.”
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Higher Social Security Primary Insurance Amount (PIA)
A person’s PIA is determined by a series of formulas, some of which are based on an average of what they earned while working. Working longer might increase that average.
“As Social Security looks at your top 35 earnings years to calculate your monthly benefit, your peak earning years have the biggest impact on your PIA,” explained Lori Gross, a financial and investment advisor at Outlook Financial Center.
More Time for Investments To Grow
Waiting another year or so can give 401(k) plans and other retirement accounts the chance to earn even more.
“This can be especially impactful, as not only does it give your investments more time to grow, but for many, they are able to continue contributing into their retirement accounts, as well,” Meyer explained. “This extra year can significantly increase your nest egg, increasing confidence and giving you an increased income in retirement.”
Lower Health Insurance Costs
If a person is choosing to retire before they’re 65, they won’t be old enough to be eligible for Medicare, which Gross explained can make healthcare very expensive.
“It can be the difference between having employer health insurance for that year or having to go into the marketplace and possibly paying much higher rates for health insurance. If a person has not reached Medicare eligibility age and is retiring, they must consider what options they have for healthcare coverage during the gap period,” she said.
A Chance To Try Out the Retirement Budget
Before retiring, Devin Carroll, the owner and lead advisor at Carroll Advisory Group, recommended assessing expected retirement income — how much money is in retirement accounts and how much money one would receive for Social Security — and attempting to live off that before officially retiring.
“If you do have a plan, and know your goal budget amount, it never hurts to put yourself on a trial retirement to see if you can live within that budget,” he explained. “You may discover that your planned income for retirement needs to be adjusted.”
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This article originally appeared on GOBankingRates.com: 5 Benefits To Holding Off Your Retirement Beyond 2025
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