Retirement Planning: Should You Postpone Social Security as Inflation Rises?
More than one in 10 American workers nearing retirement age are postponing retirement plans due to current high inflation rate, according to a new study from the Nationwide Retirement Institute. That percentage might get even bigger if inflation continues.
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Before making a decision on whether you should postpone retirement, there are a few things you need to consider. The biggest is whether you have enough money saved up. This is an important consideration in any economic environment, but it’s especially important when the inflation rate is at 7.9% and possibly moving higher.
As GOBankingRates previously reported, once you hit age 60, many financial experts recommend that you have seven times your annual earnings saved for retirement. Others say the amount should be eight times more.
If you don’t have that much saved up, or are well below it, you’re probably better off continuing to work and earn money until you can get your retirement savings to the right place. This is especially important when prices on just about everything are skyrocketing. On the other hand, if you’ve saved a lot more than the experts recommend, you should have a big enough nest egg to ride out high inflation until it settles back down again. In this case, retiring now won’t be nearly as problematic.
Another priority is to pay off as much debt as you can to make sure you don’t start your retirement in a big financial hole. Most retirees live on a fixed income — usually a combination of Social Security benefits and retirement savings such as 401(k) accounts. It’s challenging enough paying bills in normal times, let alone when inflation is nearing historic highs. You don’t want a mountain of debt sucking up even more of your money.
Putting off retirement in an era of high inflation also makes sense if you’re reaching an age when you can sign up for Social Security benefits. The earliest you can do that is age 62. But because your benefits increase the longer you wait to collect, you might be better off continuing to work until you reach full retirement age, which might be 66 or 67, depending on when you were born. That extra money will come in handy if inflation rates remain high.
You can delay filing for Social Security past the full retirement age, as well, growing your benefits even more, The Motley Fool reported. For each year you hold off until age 70, your benefits increase 8%.
Finally, think about what your life will be like once you leave the workforce. If you enjoy your job, there’s no reason to leave it — and the income it provides — by retiring before you really need to. The money you earn on the job will come in very handy in the current inflationary environment, allowing you to pay your bills with less stress and continue to stash money away in your retirement account.