3 Less-Obvious Benefits of Retiring Late

For many people, retiring early is the ultimate dream. You can ditch the daily alarm clock, reclaim your time, and do all of the things you were too busy for while you were working.

But while retiring early is certainly appealing, there are benefits to retiring late. Here are a few you should know about.

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1. A bigger financial safety net

Working a few extra years doesn't just mean earning more income and boosting your retirement savings. It also means leaving your existing nest egg untapped longer. And that could make a huge difference in your finances overall.

Let's say that instead of retiring at 67 with $1.4 million, you decide to retire at 72 instead. By delaying that milestone five years and allowing your portfolio to keep growing at a conservative 5% return, you're looking at gaining close to $400,000 extra, bringing your balance to about $1.8 million. That's a pretty substantial bump.

2. Larger Social Security checks

There's no rule stating you must claim Social Security as soon as you retire. It's more than possible to end your career at age 65, for example, but delay your Social Security claim until age 70.

But it can be tough to hold off on Social Security when you're no longer earning an income. Retiring late could make it easier to wait on Social Security, leaving you with larger monthly checks for the rest of your life. Remember, for each year you delay your claim past full retirement age, your benefits grow 8%, up until age 70.

3. The option to potentially put off RMDs

If you have your retirement nest egg in a traditional IRA or 401(k), you'll have to start taking required minimum distributions, or RMDs, at age 73 (or 75, depending on your year of birth). But if you're still working when you first become responsible for taking RMDs, you may get the option to delay them.

The rule is that if you're still working for the company that provides your 401(k) plan and you own 5% or less of the business, you don't have to take an RMD from that account. Now, that rule doesn't apply to other retirement accounts you might own. But it could help you avoid RMDs on some of your savings, allowing that money to continue growing in a tax-advantaged fashion.

Retiring late may not be as desirable a choice as retiring early. But there are many ways to benefit from a later retirement. And if you like what you do and your job isn't particularly stressful, you may find that working longer makes sense for you on multiple levels.

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