Why Delaying Retirement Could Be Your Best Financial Move

Charlene Rhinehart is a CPA, CFE, and chair of an Illinois CPA Society committee, holding a degree in accounting and finance from DePaul University.

Early retirement, often defined as leaving the workforce around age 55, isn’t a feasible option for most. Unless you benefit from a full pension with early eligibility—common in military, police, or firefighting careers—you’ll likely need to work until at least 67 to build sufficient savings for a comfortable retirement.

Many choose to work longer to maintain mental and physical engagement or because their savings fall short. Below are eight compelling reasons why retiring early might not be the smartest choice.

Key Insights

• Early retirement demands a significant financial cushion that many lack.
• Longer life expectancies mean extended retirement periods, increasing the risk of depleting funds.
• Healthcare expenses before Medicare eligibility can be a substantial burden.

1. Insufficient Savings

Various factors can limit retirement savings. Starting a family later, supporting children through college, caring for aging parents with medical expenses, or managing mortgage and debt can all strain finances. To maintain your current lifestyle post-retirement, carefully evaluate your expenses against your savings before deciding to retire early.

2. Increasing Longevity

Your Social Security statement estimates life expectancy, but personal health and family history can extend this. With healthy habits, you might live well beyond average, requiring your savings to last longer. The Social Security Administration notes that one in three 65-year-olds will live past 90, and one in seven past 95. The average monthly Social Security benefit in 2024 is $1,924.35, which may be insufficient without additional savings or pensions, suggesting a later retirement age could be beneficial.

3. Early Retirement and Mortality Risks

A 2016 study in the Journal of Public Economics links early retirement to higher mortality rates, especially in men. Approximately one-third of Americans claim Social Security at 62, but stopping work early may increase mortality by about 20%, highlighting health risks associated with early workforce exit.

4. Postponing Your Dream Experiences

Saving more by working longer means greater financial freedom to enjoy retirement adventures—whether a safari in Tanzania, a Caribbean cruise, or Mediterranean sailing. Delaying retirement can help grow your 401(k) and turn bucket list dreams into reality.

Important Note

Claiming Social Security at 62 yields only about 70% of your full benefits, impacting your retirement income.

5. Reduced Social Security Benefits

Starting benefits at 62 results in reduced payments. Full retirement age varies by birth year, with those born in 1960 or later reaching it at 67. Waiting until 70 maximizes monthly benefits, with no advantage beyond that age. Benefits are calculated based on your 35 highest earning years, so early retirement or inconsistent work history can lower your Social Security income. Consult the Social Security Administration for personalized projections.

6. Impact on Spousal Benefits

If you earn more than your spouse, early claiming reduces survivor benefits your spouse may receive. Starting benefits before full retirement age means lower payments for both you and your spouse over time, potentially affecting long-term financial security.

7. Potential Downsides of Early Retirement Offers

Early retirement packages may not cover all your needs. Withdrawals from 401(k) accounts before age 59½ can incur a 10% penalty unless qualifying for hardship. Health insurance coverage gaps before Medicare eligibility can lead to costly COBRA or marketplace premiums. Understanding these costs is essential before accepting early retirement.

8. Challenges Re-entering the Workforce

Returning to work after early retirement can be difficult, especially over age 50. Job opportunities may be limited and pay lower than previous roles, making early retirement a potentially risky decision if you plan to return to employment.

2025 Retirement Account Contribution Limits

For 401(k)s, the contribution limit is $23,500, with an additional $7,500 catch-up for those 50 and older. IRA contributions max out at $7,000, plus a $1,000 catch-up for eligible individuals.

Penalty-Free Retirement Withdrawals

Withdrawals from retirement accounts without penalties begin at age 59½, otherwise a 10% tax penalty may apply unless qualifying for hardship exceptions.

Final Thoughts

Deciding when to retire involves careful consideration of finances, health, and personal goals. Seek guidance from Social Security experts, tax advisors, and financial planners to make informed decisions that secure your future.

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