In a hurry to retire? Do the math first, because waiting means having more money
Although a troubling number of executives and brokers with bailed-out firms still seem to be on track with an ultra-cushy retirement, yours might be derailed. Reality check: You probably won't be able to retire when you had hoped to, unless you make a lot more money and save it.
This is bitter news, though there are some unexpected benefits to retiring later.
Longevity may be on your side. The typical 65-year-old will live to be 83, and one in 10 at that age will live into their 10th decade, the Social Security Administration says.
Staying in the workforce helps. Several retirement systems across the world, including US Social Security, will boost payments the longer you postpone leaving the workforce.
You can start to take Social Security at 62. Unless you can't work anymore, that can be a bad choice.
Let's say you qualify for full benefits at 66. If you start taking payments at 62, a $1,000 monthly check that you would have qualified for at 66 is reduced to $750.
Wait five years, and the picture is different. The government then pays you $1,080 a month. Want to wait until 70? The payment tops out at $1,320.
I know that few can live in a major metropolitan area on $1,320 a month, though you will also be covered by Medicare at age 65. But the principal is universal: The longer you work, the more you can accumulate for retirement.
Working longer has a compounding effect, because while you are boosting your eventual Social Security payments, you will also be adding to your other retirement plans and earning money on those savings.
Working and saving more are great bedfellows in retirement planning. According to T. Rowe Price, for each additional year you work full time, you can expect to boost retirement income from your investments by 7 percent.
If you save more aggressively while staying on the job longer, it sweetens the pot even more. Work an extra three years while putting away 15 percent of your annual salary, and you can boost annual income 22 percent. Wait five years while saving 25 percent, and retirement income climbs 50 percent.
The study assumes that you have a $500,000 diversified portfolio of 40 percent stocks, 40 percent bonds, 20 percent short-term bonds, and cash returning 4 percent - with inflation at 3 percent annually. Salary is pegged at $100,000, and returns range from 4 to 10 percent.
Keep in mind that there are plenty of wild cards, such as roaring inflation or a long market slump. The main principle is that if you are beating inflation - your main objective - saving while working will be a potent retirement strategy. And if you aren't withdrawing funds, in most years, they are compounding.
John F. Wasik is a Bloomberg News columnist. He can be reached at jwasik@bloomberg.net. 
