Deciding When to Delay Retirement

The path to retirement is tricky to navigate, and there's no GPS--or even a road map--to help you decide when to take the off-ramp. Edward Acker, 69, an architect in Fairfax, Va., says he doesn't plan to retire for at least five years: "I can't afford to. I didn't put enough money aside, and we lost a whole bunch of it anyway in the recession," he says. "We didn't have enough money before, so the fact that we have two thirds of nothing is still nothing."

The investments baby boomers hoped would propel them into early retirement are now tying them to the workforce longer. Slightly over 25 percent of Americans between the ages of 65 and 74 were still working in 2008, according to the Census Bureau. And amazingly, 9 percent of adults ages 75 to 84 are still employed. Many of those on the cusp of retirement whose investments were hit hard in 2008 will have little choice but to continue working. About half of all employed adults ages 50 to 64 say they may delay retirement, and an additional 16 percent say they don't expect to stop working--ever, according to a recent Pew Research Center survey.

Luckily, delaying retirement for even a relatively short amount of time can give your nest egg a big boost. Each extra year in the workforce buys more time for your portfolio to grow and shortens the number of retirement years you'll need to finance. What's more, Social Security benefits increase by 7 to 8 percent for each year a worker delays signing up between ages 62 and 70. "If you can hold off on claiming your Social Security benefits for even one extra year, that is a positive," says Brendan O'Keefe, a financial planner and president of O'Keefe Wealth Strategies in Orleans, Mass. Plus, check amounts are calculated based on your 35 highest-earning years in the workforce. Think about it this way: Each extra year you work in your 60s will cancel out one of the lower-paying years from your 20s, assuming you earn a higher salary now.

Delaying retirement doesn't have to mean working forever. An extra year or two in the workforce may be enough to lift your 401(k) to its 2008 level. For example, a 55-year-old employee who socks away 10 percent of his or her salary in a 401(k) can replace 2008's stock market losses by working for two more years, according to calculations by consulting firm Hewitt Associates. And a 40-year-old who contributes 7 percent of his or her pay need work only one extra year.

Simply erasing 2008's losses isn't enough for those who weren't prepared for retirement before the recession began. Steve Sass, associate director of research for Boston College's Center for Retirement Research, calculated that prior to the stock market crash, the typical baby boomer looking to retire in eight years would need to work between two and four years longer than current retirees to achieve a comparable retirement income. Now, he says it will take workers dependent on investments for retirement income an additional 11/2 to two years at the office to offset retirement account losses. "Instead of retiring at age 63, which is the retirement age of the average person, I would say 68," Sass says.

You may have to work longer, but you don't have to be stuck in a rut. "If the reason that you want to retire is because you hate your job, changing from what you are doing into something you want to do now is probably a better solution," says Carlos Lowenberg, a financial consultant and chief executive of Lowenberg Wealth Management Group in Austin. Almost two thirds of workers who find new jobs after age 51 move into new occupations or industries, and about 24 percent go to work for themselves, according to research from the AARP Public Policy Institute and the Urban Institute.

Remodeling your life. Murray Scureman, 70, of Potomac, Md., traded stressful business meetings as a lobbyist for a hammer and wrench when he started his own home remodeling businesses, Denman Development Group, in 1999. "What got me into it was doing remodeling on my own home," says Scureman, who now works seven days a week and employs five carpenters. "There is something satisfying about seeing a house go up as opposed to shifting everything from your inbox to the outbox."

Continuing to work full time is the quickest way to increase your financial security, but you can still make headway even if you scale back on hours. "Maybe now you work part time until 70 instead of retiring at 65," says Roy Williams, chief executive of Prestige Wealth Management Group in Pennington, N.J. Acker says he wouldn't mind cutting back on hours at the architecture firm as he ages. "What I'd ultimately like to do is probably taper off to a few days a week being a consultant," he says. "Not having a real job but still keeping my finger in the pie and being active and perhaps even having an office to go to."

Some current retirees, left with decimated nest eggs and few options for affordable health insurance, have been making the difficult journey back to the workforce. Dannie Needham, 62, a retired computer programmer for Radio Shack in North Richland, Texas, recently went back to work part time to pay for health insurance premiums for himself and his wife, Pat. "We thought there would be something reasonable that would cover us, and there just wasn't anything there," Needham says. "We visited with no less than 10 to 15 group companies, and we were denied insurance based on our pre-existing conditions." The couple eventually joined the Texas State insurance pool, which costs $1,350 a month. To make matters worse, the value of Needham's 401(k) also fell by about $100,000 in 2008.

To pay for healthcare without depleting his nest egg, Needham now works part time at a local high school driving a bus, assisting the sports teams, and doing general maintenance at the school. Pat is looking for a part-time job as well. "We were pretty naive when we retired, but because we are working these part-time jobs, we are able to make it," he says. Needham also says he enjoys the flexibility of his relaxed schedule. "I didn't want to spend the next 10 years in a cube," he says. "And I wanted to spend the time with the grandkids." He now watches his 3-year-old granddaughter several days a week.

For Christopher Richards, 59, a Single Hill, Calif., line technician for a company that makes aluminum cans, the prospect of leaving the steady paycheck that supported his family for decades was unnerving. "It's like taking a giant leap or jumping off a high-meter diving board in front of a bunch of people," says Richards, who becomes eligible to retire on October 31. Although Richards daydreams about leaving the workforce and buying property in Montana, he recently pushed his retirement date back to January 2013. Layoffs are common in the manufacturing industry, including at Richards's company, and those who have well-paying jobs usually try to hold on to them. "You fantasize about walking out the door and never going back," says Richards. "But the common-sense factor always kicks in."