Social Security: The Surprising Reason You Shouldn’t Work Longer To Max Out Benefits

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The decision on whether to work longer to ensure a more comfortable retirement might become a moot point for many Americans if lawmakers succeed in raising the Social Security full retirement age. If the FRA is raised to 70 from 67, as some have proposed, a large number of seniors might have little choice but to continue working so they can delay collecting Social Security and maximize their benefits.

But that’s not necessarily the best strategy — no matter where the full retirement age ends up going over the next few years.

According to “Overtime: America’s Aging Workforce and the Future of Working Longer,” a new book published by Oxford University Press, working longer to maximize Social Security benefits is an unrealistic option for many seniors.

The book, edited by Lisa F. Berkman and Beth C. Truesdale, contains a collection of essays from various policy experts. A synopsis on the Oxford University Press website points out that Americans today live longer and healthier lives than they did 50 years ago, and therefore need income for more years.

Are You Retirement Ready?

Because of this, many policymakers and academics “think it is logical — almost inevitable — that Americans will work longer, delay retirement, and spend more of these years in the paid labor force.”

But due to a rise in social and economic inequalities in the United States, policies that encourage working longer are a poor fit for seniors who fall below a certain income threshold or have certain responsibilities outside of the workplace. A summary of the book on the Harvard University website notes that delayed retirement is “not an adequate solution” for many aging adults, even those without enough retirement savings.

“Precarious working conditions, family caregiving responsibilities, poor health, and age discrimination make it difficult or impossible for many to work longer,” the Harvard analysis said.

This goes against the grain of what many financial experts recommend, which is to delay retirement as long as possible so you can build up your nest egg and maximize your Social Security benefits.

Are You Retirement Ready?

As previously reported by GOBankingRates, waiting until age 70 — the current age when your Social Security benefits max out — has numerous financial benefits. Collecting benefits at age 70 instead of 62 increases monthly payments by 77% when adjusted for inflation, according to a paper in the “Journal of Financial Planning” by Wade Pfau and Steve Parrish.

A separate study conducted by researchers at the Federal Reserve, Boston University and Opendoor Technologies found that waiting until age 70 to claim Social Security would boost recipients’ lifetime discretionary spending by a median $182,370 in today’s dollars.

That sounds like a good strategy for many seniors — but not all of them. One risk of working longer, especially in physically demanding jobs, is that your health will deteriorate to a point where your medical costs will outweigh any financial benefit to delaying retirement.

“Gaps in work capacity by education are large and increase with age, suggesting diminished prospects for working longer among those with less education,” the Harvard “Overtime” summary noted. “Although work capacity among Black respondents improves across cohorts, today’s middle-aged white Americans have lower work capacity than those now at retirement age, suggesting rising rates of work disability as these cohorts age.”

Are You Retirement Ready?

The book outlines five factors that can undermine the concept of working longer to boost retirement income, including “trends and inequalities in American demographics, health, family dynamics, jobs, and politics.”

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Among the book’s conclusions is that “robust retirement and disability policies are essential complements to working-longer policies,” and that working-longer policies must be supported by a “good jobs” policies to be successful.

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