Why it May Be Smart to Work a Little Longer
Before retiring and taking money from your Plan, you may want to consider either delaying your retirement or taking an additional job for a few years – or both.
Why? Consider these points:
- Pension alone may not be enough – For most Americans, pension and Social Security benefits will simply not provide enough retirement income. On average, a public pension will provide only about 50% of your current income after 25 years of service. Most industry professionals say you’ll need about 70% to 90% of your current income just to maintain your standard of living in retirement.1
- Factor in inflation and medical costs – When inflation and increases in medical costs are factored in, some experts say you may need as much as 126% of your final pay¹ in retirement. Use the Interactive Retirement PlannerSM to learn how much you’ll need.
- You can play catch-up – If you continue working, you can boost your contribution level and play catch-up with your savings. In 2020, the 50+ Catch-up option allows eligible participants to save up to $6,500 over the current annual maximum of $19,5002. The 457(b) Special Catch-up option allows eligible participants to contribute up to double the annual limit for three years prior to the year of retirement. You can only use one of these catch-up options at a time, but both can help you invest more during your last years of work.
- Give your money more time for possible growth – You may be surprised at the difference a few extra years may make in your account balance. Take a look at how much more you could have by delaying retirement just five years.
Spend it now or spend potentially more later
$300,000
Lump sum payment now
In an investor's pocket after federal income tax
$300,000 +
Invested in tax deferred retirement plan
$420,765
Account balance
$120,765 =
5 years, 7% return
Â
In an investor's pocket after federal income tax
Neither Nationwide nor its representatives provide legal or tax advice. This example is hypothetical and is not intended to predict or project investment results of any specific investment. Investment return is not guaranteed and will vary depending on your investments and market experience. Return will vary, particularly for long-term investors. After tax investment balance does not include fees. If fees were included the amount would be lower. Federal income tax calculation based upon 2019 Federal Tax Rate Schedule Y-1 — married filing jointly. It does not reflect any deductions or income earned from employment.
If you decide to retire, taking an in-retirement job may let you delay taking withdrawals from your account, allowing it to keep working for potential earnings.
And if you stay employed a while longer, you could continue contributing to your 457(b) deferred compensation account, which would give it more time for possible growth. You could also take a second job for income to offset catch-up contributions.
Get the help you need
Talk with a Retirement Specialist before you decide to retire, to discuss your options.
Investing involves market risk, including possible loss of principal.
1Hewitt Study Reveals Widening Gap Between Retirement Needs and Employee Saving Behaviors, http://hr.cch.com/news/pension/072308.asp (accessed 6/15/11).
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