The Illusory Benefit of Working Longer on Retirement Financial Preparedness: Rethinking Advice That Working Longer Increases Retirement Income

Abstract

This article demonstrates that although working longer can, in theory, substantially improve financial preparedness for retirement, it yields much smaller improvements in practice. Multivariate analysis using data from the Health and Retirement Study reveals that working longer improves financial preparedness only for workers who also delay claiming Social Security. But most older workers combine work with Social Security benefits, do not increase their financial wealth, and miss out on the delayed retirement credit. For many, early claiming is a rational choice because their low and often part-time earnings fall short of projected post-retirement income.