Thinking about retiring? Here are 4 reasons to work just a little while longer.

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From potentially increasing your Social Security benefits to lowering your health care costs, postponing retirement for a few years can help boost your financial security in retirement.

Key points

  • Longer life expectancies and market volatility are leading many people to consider working longer to continue building their nest egg
  • Postponing retirement can be beneficial. You'll have more time to save while reducing the time your savings must support you once you do retire.
  • Larger Social Security payments, lower health insurance costs and the confidence to consider investing for continued growth are all potential benefits
There are many reasons to consider delaying your departure from the work force, and only some are financial. If you're healthy and you enjoy your job, you may not want to retire. Or you could decide to switch jobs to pursue a lifelong passion. Such choices are all the more likely today, when the average 65-year-old can expect to live almost another 20 years, according to the U.S. Social Security Administration.
Delaying retirement, even for a relatively short time, can help improve your financial outlook.
Still, economic factors are part of the equation for many would-be retirees. According to the 2018 Employee Benefit Research Institute Retirement Confidence Survey, 14% of respondents said they had adjusted their expected retirement age in the past year, with 78% of them expecting to retire later.Footnote 1 They may be right to worry. Rising health care costs, especially for long-term care, and uncertainty about investment returns are common concerns. "This raises the specter of higher-than-expected expenses, lower-than-expected income — and the distinct possibility of outliving retirement assets," says Ben Storey, director of Retirement and Personal Wealth Solutions of Thought Leadership for Bank of America.Footnote 2 "Delaying retirement, even for a relatively short time, can improve that outlook and help you increase your nest egg."
Here are four reasons staying on the job can help.

1. More time to invest

While you keep working, you can generally continue making contributions to your workplace retirement plan if you have one, or to a traditional or Roth IRA. Not only will you add to your retirement savings, but you can leave those retirement accounts untouched, giving your assets more time to potentially grow. Generally, in the case of traditional 401(k)s and IRAs, you'll also extend the period of tax deferral for your investments. (Investment gains in a Roth IRA are tax-deferred and withdrawals during retirement are normally federal tax free, and may be state tax free, if taken as qualified distributions.)Footnote 3 You could even make a final push to contribute as much as possible. "If you're 50 or older and can afford it, consider taking advantage of the catch-up provisions that let you maximize your retirement savings contributions," says Debra Greenberg, director of Personal Retirement Strategy and Solutions for Bank of America. Those extra amounts take you beyond the normal annual limits for pre-tax or tax-deductible contributions.

2. More income from Social Security and annuities

Meanwhile, each year you postpone taking Social Security benefits (until age 70) adds significantly to your monthly check once you begin receiving payments. The earliest you can claim benefits is at age 62. However, if you wait until age 70 instead, you'll receive 76% more each month.
For Social Security, full retirement age is defined as the age at which you may receive "full" retirement benefits. It's currently 66 but will be higher for those born after 1954. This Social Security Administration calculator can help you find your "full retirement age":
Similarly, waiting to start collecting payments from a lifetime annuity that you purchased will also enhance your benefits. "A 68-year-old gets a much better payout from a lifetime annuity than a 66-year-old would because of the difference in life expectancy," says Storey.

The advantages of delaying your Social Security benefit

The older you are when you file for Social Security benefits, until you reach age 70, the greater your annual payment for the rest of your life. The chart below shows how the annual benefit amount can change for a retiree who is eligible to receive $24,000 per year at the Full Retirement Age (FRA)* of 66.
This bar chart shows: a retiree filing for benefits at age 62 receives $18,000 per year; at age 63, $19,200 per year; at age 64, $20,800 per year; at age 65, $22,400 per year; at age 66, $24,000 per year; at age 67, $25,920; at age 68, $27,840 per year; at age 69, $29,760 per year; and at age 70, $31,680 per year.
Source: Chief Investment Office calculations based on Social Security Administration calculator at (accessed August 2017).
* Full Retirement Age is the age at which a person may first become entitled to full or unreduced retirement benefits.

3. More options for less expensive health insurance

If you stay in the work force and keep your company's health insurance, you'll likely pay lower premiums than if you bought your own policy after retiring, but before your Medicare eligibility at 65. Even after you turn 65, your company's health insurance may also offer richer benefits than Medicare, which typically covers only about two-thirds of health expenses, according to the U.S. Employee Benefit Research Institute.
While you're still working, you may want to consider how you would pay for long-term care in a nursing home if the need arises. "Buying a long-term-care insurance policy when you're in your 50s will be considerably less expensive than if you wait until your late 60s or your 70s," says Greenberg.

4. More confidence as an investor

Having the increased security of a paycheck could also make you more comfortable taking appropriate investment risks that could result in potentially greater investment growth. As you head into retirement, you may need to consider having some allocation to stocks for continued growth potential, says Storey. "You might invest a little more aggressively while you're working, because you'll still have income coming in and more time to recover your losses if the market declines," he says.Footnote 4
Even if continuing to work full time in your current job isn't feasible or palatable, you might get a new lease on your work life by changing careers, joining a nonprofit or scaling back to part time. And whatever path you choose, there could be an additional benefit. "Staying active often helps people live well longer," says Greenberg. "Continuing to work can be the secret to positive mental health."
Next steps

This material should be regarded as general information on Social Security considerations and is not intended to provide specific social security advice. If you have questions regarding your particular situation, please contact your legal or tax advisor.

Annuity contract and rider guarantees, or annuity payout rates, are the sole obligations of and backed by the claims paying ability of the issuing insurance company. They are not obligations of or backed by Merrill Lynch or its affiliates, nor do Merrill Lynch or its affiliates make any representations or guarantees regarding the claims-paying ability of the issuing insurance company.

Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.
Long-term care insurance coverage contains benefits, exclusions, limitations, eligibility requirements and specific terms and conditions under which the insurance coverage may be continued in force or discontinued. Not all insurance policies and types of coverage may be available in your state.

Footnote 1 Source: Employee Benefit Research Institute, "Savings Medicare Beneficiaries Need for Health Expenses," October 2018

Footnote 2 Bank of America Merrill Lynch is a marketing name for the Retirement Services business of Bank of America Corporation.

Footnote 3 For a distribution from a Roth IRA to be federally tax free, it must be qualified. A qualified distribution from your Roth IRA may be made after a five-year waiting period has been satisfied (this period generally begins January 1 of the tax year of the first contribution or the year of conversion to any Roth IRA) and you (i) are age 59½ or older; (ii) are disabled, (iii) qualify for a special purpose distribution such as the purchase of a first home (lifetime limit of $10,000), or (iv) are deceased. If you take a non-qualified distribution of your Roth IRA contributions, any Roth IRA investment returns are subject to regular income taxes, plus a possible 10% additional tax if withdrawn before age 59½, unless an exception applies.

Footnote 4 Asset allocation does not ensure a profit or protect against loss in declining markets.