What Does One More Year on the Job Mean for Retirement?

By Michelle D. Bennett, AIF^®, CFP^®, Executive Vice President,
Newport Capital Group

Building wealth over time gives families many options, but one of the biggest is the freedom to choose how to use your time.

For someone nearing retirement with sufficient resources, that may mean leaving a demanding career, cutting back on hours, or choosing to keep doing work they truly enjoy.

For people wrestling with whether to retire, a deceptively simple thought often comes up: maybe I should just keep working for a year or two longer.

That extra stretch of employment can feel safer than making a change, but delay is not always the wiser move. More income has value, but so does the time that is traded for it.

Extending a career can seem appealing because it is familiar and financially sensible. You continue earning, add to your savings, and avoid a major life change before you feel ready. More assets can also offer comfort in the face of market swings, future healthcare bills, or the possibility of a very long retirement. Those are all legitimate reasons to stay employed, and in some cases an extra year or two can materially improve the plan.

Still, if you never define what retirement readiness actually means, the goalposts can keep shifting.

The real question is not whether another year leaves you with more money. It is whether that extra money meaningfully expands the choices you want in retirement.

A good place to start is by measuring the difference. The key number is not gross salary, but the net change another year of work would create in your financial picture. That means the savings you can add and the withdrawals you can avoid, after taxes, living expenses, retirement contributions and work-related costs.

Consider a couple with a $4 million portfolio who work one more year. They add $80,000 in net savings and avoid $120,000 in portfolio withdrawals. Setting aside investment returns and holding everything else constant, they end that year $200,000 ahead of the retire-now scenario, equal to 5% of their starting portfolio. That is a meaningful amount, and it could support a larger charitable gift, a bigger inheritance or an extra layer of cushion they value.

But the more important issue is whether that additional $200,000 changes a concrete outcome. Does it allow them to spend more each year? Does it materially improve protection against healthcare or long-term care costs? Or does it preserve a legacy goal that might otherwise be in jeopardy? If either path already supports the retirement they want, the extra savings may bring peace of mind without really widening their options.

It is also worth considering what that extra year would be used for instead. Maybe it becomes a long-awaited trip with a spouse that never fit around work. Maybe it means spending a summer near grandchildren, getting more involved with a charity, or finally pursuing an interest that has been pushed aside for weekends. Those are not trivial questions to set aside until after the math is done; they are part of what the analysis should help reveal.

Timing matters, too, because some opportunities cannot wait forever. A hiking-focused trip may be easier to enjoy while both spouses feel up to the physical demands. Time with grandchildren before they head off to college cannot simply be postponed indefinitely. In other words, an experience delayed is not always an experience preserved.

Of course, for some people, work itself is the preferred way to spend that time. J.P. Morgan research found that among people who work in retirement, 59% said staying active and involved was a reason, while 52% said they simply enjoy the work.^[i] Professional relationships, mental challenge, leadership and purpose can all be deeply fulfilling. Financial independence does not require leaving a career you love.

There is also a middle ground to consider.

Keeping parts of what you value about work does not necessarily mean maintaining the same schedule or responsibilities forever. 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 leaving more room for other priorities. Couples should also discuss what that transition would mean for each spouse, rather than assume they want the same retirement lifestyle.

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

Ask your advisor to compare retiring now, in two years and in five years. Each scenario should reflect realistic spending, taxes, healthcare and possible long-term care costs, available liquidity and family or charitable commitments. Stress-testing weaker markets and longer lifespans can help show how much flexibility each option offers.

The comparison should go beyond which date leaves the biggest ending portfolio. Does waiting meaningfully improve sustainable spending? Does it protect a specific legacy goal? Or does it mainly add assets beyond what the plan requires?

You do not need 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 truly what you want.

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