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Should you delay retirement?

Written by Retirement Line Updated: 23rd January 2024

Retirement is a significant milestone in our lives, and the beginning of an exciting new chapter for many of us. But there may be good reasons for delaying retirement.

According to the insurer Legal & General, more than 2.5million people are planning to delay their retirement due to the cost of living. There are many financial and even some mental health benefits to continuing in employment for longer.

However, there are some drawbacks to consider, too. Working into old age may negatively impact your physical health, and annuity customers should be aware of the ‘cost of delay’, too. 

To help you plan ahead, we’ll explain some of the main pros and cons to delaying your retirement.

After reading through the following information, you may wish to speak to a financial adviser who can recommend whether delaying retirement is right for you or not. Ultimately, the decision to delay retirement should align with your goals, values and aspirations for your retirement years.

What does ‘delaying retirement’ mean?

Usually, delaying retirement means continuing to work either full or part-time for longer than you planned to. 

There is no forced retirement age anymore, so you can take retirement whenever you wish. However, many people typically work until they are eligible for their pension to ensure an income continues to come in. 

Some set the goal at 55 – the age at which you can normally access your private or workplace pension fund – while others aim for State Pension age which is currently 66 for both men and women.

The pros of delaying retirement

While you might be eagerly anticipating retirement, there are some potential benefits to delaying retirement. In addition to the financial benefits of working longer, there’s the mental and physical benefits of having a career and socialising in the workplace. Here are some of the main potential benefits of delaying retirement.

Financial security

One of the most compelling reasons to delay retirement might be additional financial security. For example, by working for a few more years, you may be able to accumulate additional savings and increase your pension contributions. If you have worked out how much money you need for your retirement, working a bit longer could help you achieve your financial goals.

Increasing your State Pension income

There are a couple of ways that delaying your retirement may increase how much go on to receive when you do retire.

In the UK, the State Pension is based on the number of qualifying National Insurance years you have built up throughout your working life. You need at least 10 years of NI contributions to get any State Pension, and 35 years to get the full new State Pension. By delaying retirement, you may be able to accumulate more qualifying years, potentially securing a higher State Pension when you do eventually retire. 

In addition, if you choose to defer receiving your State Pension then you can get a higher amount paid to you when you do claim. The State Pension increases by 1% for every nine weeks you put off claiming it, or around 5.8% for each full year. 

This currently equates to an extra £47.28 every four weeks for each year that you defer. However, you’ll need to weigh this monthly increase up against how much State Pension income you lose by deferring for one year or even more. 

The full State Pension is worth up to £10,600 a year. If at 66 you delay receiving the State Pension by one year then you could boost your full State Pension by up to £614 each year. 

However, it would take over 17 years to recoup the £10,600 that you missed in that first year. This means you would have to live until you were 84 to start seeing any benefit.

You may also wish to use an income-tax calculator to work out whether the larger monthly State Pension payments could push you into a higher tax bracket in the future.

Continued employment benefits

By remaining in employment you can continue contributing to your workplace pension fund and benefit from any contributions your employer makes, too.

Remaining in the workforce also means retaining any employee benefits you might get, such as health insurance, dental plans or life insurance. These benefits can be valuable, especially as you get older and may require more frequent healthcare services.

Mental and social stimulation

Work provides a sense of purpose, structure, and social interaction. Delaying retirement can keep you engaged, mentally stimulated and socially active. Many people find that they miss the social aspects of their workplace when they retire, so continuing to work can help maintain a sense of belonging and camaraderie.

Cons of delaying retirement

As with any important decision to be made, it’s important to weigh up the pros against the cons. There are some drawbacks of delaying retirement which require careful consideration. Here are some of the main ones.

Health considerations

While continuing to work may offer financial benefits, it can be physically and mentally taxing. As people age, health issues may become a concern, and postponing retirement might not be feasible. Prolonged stress, long working hours and the demands of a job can take a toll on your well-being.

Reduced leisure time

Delaying retirement means spending fewer years in retirement, potentially limiting the time available to enjoy your hobbies, travel and spend time with loved ones. This trade-off between more financial security and less leisure time is a crucial factor to consider when deciding whether to delay retirement.

Speak to our friendly team

Thinking about delaying your retirement? As you can see from the above information, if you do not need to continue working then delaying your State Pension or your annuity simply to achieve a higher income might not pay off for you. 

If you are 55+ and thinking about using an annuity to provide a guaranteed income for life then do speak to one of our annuity specialists today. They can provide all the information you need and run different illustrations to explore how much income your different options could provide for you.

Speak to our specialist team today on 0800 652 1316 or request a free call back by clicking here.

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