Thinking About Retirement? Consider Working a Little Longer

An academic study from the National Bureau of Economic Research suggests staying employed longer is a better option for people who are not in high-income brackets, reports the New York Times . Stanford University Professor John B. Shoven says increasing their monthly Social Security check can have an outsize impact on most Americans, and since Social Security is progressive, the impact of working longer is greater for those with less money. Although workers can draw benefits at 62, monthly payments will be much higher if they wait for two thresholds — the "full retirement age," at 66, and 70, which is when full benefits go into effect. The study generally assumes that the average employee is already saving 6 percent of their paycheck and that their employer is contributing 3 percent. The researchers estimate that working two years and five months longer would have the same effect on their monthly retirement income as saving an extra 10 percent of their salary until retiring at 66, assuming the employee was 46 years old and earning about $114,000 annually in 2013. Moreover, generally improving investment returns and slashing costs will have the same impact on monthly income as modest amounts of additional work. Shoven notes Social Security is an annuity founded on outdated estimates of U.S. life expectancy, making it a better option than the commercial market offers.