Reevaluating the retirement option

John Spoto


For many Americans, the idea of a traditional retirement, 30 or more years of leisure after a productive career, is neither realistic nor appealing. Increased life expectancy, better health, and the desire to remain active and productive into their 70s, 80s and even 90s are prompting them to re-examine the concept of retirement.

For some, financial realities play the central role in the decision to continue working. Expectations for lower future investment returns has motivated those of all economic levels to reevaluate whether their nest eggs can support 30 or more years of withdrawals to cover retirement spending.

According to Wharton professor Olivia Mitchell, this movement toward working longer is a return to the realities of the early 1900s before the introduction of Social Security and what we now consider the “old-fashioned” pension plans that pay monthly benefits for life. Back then people worked for as long as they were physically able. "Sitting around and doing nothing was an alien concept,” says Mitchell. Now, due to circumstances including the shift away from those pension plans, concerns regarding the sustainability of Social Security and the awareness that retirement can last decades, the historical trend toward retiring earlier began to reverse itself starting in the 1990s.

However, to conclude that people are delaying retirement solely for economic reasons would be ignoring the influence of other important considerations. A survey of wealthy individuals conducted by Barclays Capital suggested that many of those who could otherwise afford to retire without financial worries are choosing to stay employed for as long as they can. They view interesting work as a means to stay engaged, challenged and productive, and contribute to society.

The financial benefits of working longer should not be overlooked and cannot be overestimated. It is one of the most essential aspects for achieving retirement security because it impacts an individual’s finances in many ways.

Larger nest egg and fewer withdrawals. Employees who participate in 401(k) type plans can make additional tax-deferred contributions and allow their investments to grow for a longer period. Also, fewer years of withdrawals means your nest egg will last longer.

Increased retirement benefits. For those eligible to receive a monthly pension annuity, additional years of service may increase the monthly lifetime benefit.

Savings on health care costs. Employer subsidized health insurance is one of the primary reasons many people stay in the workforce.

Larger Social Security benefits. For each year you delay taking Social Security benefits after your full retirement age (and up to age 70), you will increase the benefit you receive by about 8%. It is nearly impossible to find a safe investment that yields such an outstanding return. These larger checks will improve your (and your spouse’s) retirement security, especially in old age when you may need it most.

For many, economic well-being is only part of the argument for working longer. Studies on healthy aging conducted by researchers at leading universities and think tanks support the notion that working later in life offers physical, psychological and emotional benefits to older people. The reasons are simple. First, interesting work requires that individuals utilize their social skills and cognitive abilities which help them preserve them longer. Second, a person’s desire to work, contribute their talents and be appreciated allows them to maintain a sense of purpose. In other words, it is a great reason to get up in the morning.

This article is for general information purposes only and is not intended to provide specific advice on individual financial, tax, or legal matters. Please consult the appropriate professional concerning your specific situation before making any decisions. John Spoto is the founder of Sentry Financial Planning in Andover and Danvers. For more information, call 978-475-2533 or visit


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