NEW YORK (MainStreet) — More Americans are holding off on retirement until they reach their seventies. A recent research paper published by the Center for Retirement Research (CRR) at Boston College reveals that Social Security's real retirement age is now 70.
The driving factor: Social Security's delayed retirement credit, which causes benefits to increase 8% per year every year an employee defers claiming benefits beyond full retirement age up to age 70.
"When people wait until age 70 to retire, they end up getting a lot more money from this really good income that is inflation-adjusted and goes on for as long as people live," says Alicia Munnell, the center's director and author of the study.
Delaying your Social Security benefits has the potential to increase the total amount of income you'll receive throughout your lifetime by $100,000 or more. In addition, several other factors are making age 70 an increasingly attractive age to leave the workplace.
You can add a full year's salary – or more – to your savings
Moving your retirement age from 65 to 70 can provide substantial payback. If you are saving, say, 20% of your income for retirement, then pushing your retirement back five years will add a full year's salary to your savings. The extra time also allows an extra five years to let investments grow on a compounded basis.
"Delaying retirement gives you the option of working longer and that does three wonderful things: you have greater Social Security benefits each month, you shorten the period you need to support yourself on your retirement assets and it leaves time for your 401(k) to generate additional contributions and earnings on balances," Munnell says.
Furthermore, for married couples, waiting to collect Social Security benefits until age 70 for at least the higher earner runs the potential to boost a household's lifetime earnings by hundreds of thousands of dollars.
Lifespans are longer
With increasing lifespans comes a longer timeframe for supporting yourself on your retirement assets. It only makes sense that as a result, a larger pile of retirement assets is needed – which is why more Americans are less willing to let go of their jobs in their 60s.
"More people are finding that they aren't going to be able to maintain their standard of living in retirement," says Munnell.
In addition, many retirees are actually apprehensive about the major lifestyle changes that happen after leaving the workplace.
"People assume that when they retire it will be like Heaven on Earth," says Ken Dychtwald, Ph.D., founding president and CEO of Age Wave, a consultancy focused on aging populations. "Instead, a lot of people find that they are unhappy and retirement itself is a wasteland. 20 or 30 years of leisure being satisfying is a myth – the average retiree watched 49 hours of television a week last year."
"They start to look for something more engaging, like going back to school, starting a new career or volunteering," Dychtwald adds.
Many soon-to-be retirees are still overcoming debt
Another reason why more Americans are deciding to delay retirement stems more from necessity than choice. Their hands are still tied from years of accumulating debt.
A commitment to support family members, whether younger or older, is a big factor here. Decisions to help fund children's college educations or support aging parents, for example, are making an early retirement less feasible.
For these reasons, delaying retirement until age 70 seems like a more desirable, practical and conservative approach for many Americans today.
--Written by Renee Morad for MainStreet