What Would Another Year of Work Mean for Your Retirement?

Building wealth over time creates many opportunities for families. But perhaps one of its greatest benefits is the freedom to decide how you spend your time.

For someone approaching retirement with ample resources, that might mean stepping away from a demanding career, reducing your work hours or perhaps opting for the other side of the coin—continuing work you genuinely enjoy.

For those caught between the ‘to retire or not to retire’ decision, a deceptively simple question often emerges: Maybe I should just work one or a few more years?

Another couple of years of work can feel more comfortable than making a change, but it does not always mean waiting is the better decision. The additional money may have tangible value, but so does the time being exchanged for it.

Part of the appeal of extending a career is that it feels both familiar and financially prudent. You keep earning, continue building a financial cushion, and avoid making a major change before you feel completely ready. More assets can also provide reassurance against market volatility, future healthcare expenses or a very long retirement. Those are all valid reasons to keep working, and in some cases another year or two can meaningfully strengthen the financial plan.

But without defining what would actually make you feel retirement-ready, the target can keep moving.

The question is not whether another year would leave you with more money. It is whether that additional money would meaningfully expand the choices you want to have in retirement.

A useful starting point is to quantify the difference. The relevant figure is not your salary, but the net change another year of work would make to your financial position. That includes the savings you can add and the portfolio withdrawals you can avoid, after accounting for taxes, living expenses, retirement contributions and work-related costs.

Consider a couple with a $4 million portfolio who decide to work one more year, allowing them to add $80,000 in net savings and avoid $120,000 in portfolio withdrawals. Ignoring investment returns and holding other factors constant, they would finish that additional year $200,000 ahead of the ‘retire-now’ scenario—an amount equal to 5% of their starting portfolio. That’s a meaningful difference, and it may support an additional charitable gift, a larger inheritance or a financial cushion the couple particularly values.

The more important question, however, is whether that additional $200,000 changes a specific outcome. Does it allow the couple to spend more each year? Does it meaningfully improve protection against healthcare or long-term care costs? Or does it preserve a legacy goal that would otherwise be at risk? If both scenarios already support the retirement they want, the extra savings may provide reassurance without meaningfully expanding their choices.

The next question in this hypothetical is to examine what the couple might do with that year instead. Maybe that extra time becomes an extended trip with a spouse that never fits between professional commitments. Perhaps it involves spending a summer near grandchildren, becoming more involved with a charitable organization or finally pursuing an interest that has been relegated to weekends. These are not frivolous considerations to address after the financial analysis. They are part of what the analysis should help evaluate.

It is also important to remember that some opportunities have a timetable of their own. A trip centered on hiking may be easier to enjoy while both spouses feel comfortable with the physical demands. Time with grandchildren before they leave for college cannot simply be rescheduled indefinitely. Put another way, an experience postponed is not necessarily an experience preserved.

Of course, work itself may be how you want to spend that time. J.P. Morgan research found that among people who work in retirement, 59% cited staying active and involved as a reason, while 52% pointed to simply enjoying work.[i] Professional relationships, intellectual challenges, leadership and a sense of purpose can all be deeply rewarding. Financial independence does not create an obligation to leave a career you love.

There’s also a happy medium to explore.

Choosing to keep some of what you value about your work does not necessarily require maintaining the same schedule or responsibilities indefinitely. Retirement can be a transition rather than an abrupt stop. Consulting, board service, reduced hours or mentoring may preserve the parts of work you enjoy while creating more room for other priorities. A couple should also discuss what the transition would mean for each spouse, rather than assume they envision the same schedule or retirement lifestyle.

Whatever path feels most appealing, the next step is to see what each option looks like financially.

Ask your advisor to compare retiring this year, in two years and in five years. Each scenario should reflect realistic spending, taxes, healthcare and potential long-term care costs, available liquidity and family or philanthropic commitments. Testing weaker markets and longer lifespans can help assess how much flexibility each option provides.

The comparison should go beyond which date produces the largest ending portfolio. Does waiting meaningfully improve sustainable spending? Does it protect a particular legacy goal? Or does it mainly add assets beyond what the plan suggests you need?

You do not have to prove that retiring now is financially better than continuing to work. But you should understand whether it is financially supported and whether it is what you truly want.

 

Sources:

[i] https://am.jpmorgan.com/us/en/asset-management/adv/insights/retirement-insights/guide-to-retirement/

 

IMPORTANT DISCLOSURES

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. In addition, information presented in this presentation is believed to be factual and up to date, but Newport Capital Group, LLC does not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. 

This presentation includes forward-looking statements and opinions, including descriptions of anticipated market changes and expectations of future activity. Forward-looking statements and opinions are inherently uncertain, and actual events or results may differ materially from those reflected in the forward-looking statements. In addition, all expressions of opinion are subject to change without notice in reaction to shifting market conditions. Therefore, undue reliance should not be placed on such forward-looking statements and opinions.