I Used to Think a Delayed Retirement Was the Best Way to Make Up for a Small IRA or 401(k) Balance. But Here's a Better Solution.

There's no such thing as an official retirement age in the U.S.

Age 62 is the earliest age to claim Social Security. And 67 is full retirement age for people born in 1960 or later. That's when you're eligible for your monthly Social Security checks without a reduction in benefits.

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Age 65, meanwhile, is when Medicare eligibility typically begins. So you may equate one of these ages with an "on time" retirement.

If you're behind on savings, though, then you may be inclined to work longer to make up for an IRA or 401(k) balance you're not happy with. And if you would've asked me a few years ago what to do if your retirement plan balance left much to be desired, I probably would've told you to keep plugging away at your job beyond a traditional retirement age.

At this point, though, I don't necessarily think working longer on a full-time basis is the best way to make up for a lack of savings. It's a solution that's not available to everyone, and it may not be sustainable. Instead, there's another avenue you could explore.

The problem with delaying retirement

For some people, delaying retirement might help solve the problem of an inadequate IRA or 401(k) plan balance. If you work longer, you have an opportunity to add to your savings.

Just as importantly, you can leave your existing savings alone. So if, for example, you only have $250,000 in your IRA and you aren't happy about that, rather than retire at 65, you could keep working full-time until age 70. That means your money will have five extra years to grow, and you'll have five fewer years' worth of expenses to rely on your savings for.

The problem, though, is that it's not a given that you'll be able to keep working full-time. For one thing, your employer might end up downsizing. If you're laid off in your 60s, it could be very difficult to find another full-time job.

Even though it's illegal to not hire people (or let them go) on the basis of age, it's a difficult thing to prove. That could leave you stuck in a situation where you want to work full-time but can't.

Also, you never know if health issues might get in the way of being able to work full-time. And even if you have the option to continue at your job, you might risk harming your health.

A better way to make up for smaller savings

While delaying retirement could be a way to address a lack of savings, I'd recommend doing something a little bit different. Instead of continuing to work full-time, retire but join the gig economy.

There's a reason I'm a fan of this solution. For one thing, it may be less of a strain on you mentally and physically. Also, there are many gig roles you can't be fired from, whereas you never know when an actual employer might let you go.

Also, gig work is something you can do continuously throughout retirement. And that's a great way to not only supplement your income, but also keep busy.

If you're short on savings, you may not have that much money to spend on leisure. But if you're able to fill a few hours a week with gig work, you can earn money and avoid getting bored. It's a win-win.

Another nice thing about gig work? You can switch between jobs if you get restless or tired of a certain gig. You also get control over your schedule.

Of course, years back, I wouldn't have necessarily recommended this solution because the gig economy was less of a proven thing. At this point, though, I know people who have been getting all of their income from the gig economy for years. So I'm pretty convinced it's here to stay.

As such, if you're nearing retirement age (whatever that means to you) and you aren't happy with your IRA or 401(k), don't automatically resign yourself to staying employed on a full-time basis. You may find that joining the gig economy is a better solution all around.

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