Here’s a working paper titled The Power of Working Longer by Gila Bronshtein, Jason Scott, John B. Shoven, Sita N. Slavov which compares the effect of working longer (delaying your retirement date) and increasing your savings rate while working.
The basic result is that delaying retirement by 3-6 months has the same impact on the retirement standard of living as saving an additional one-percentage point of labor earnings for 30 years. The relative power of saving more is even lower if the decision to increase saving is made later in the work life. For instance, increasing retirement saving by one percentage point ten years before retirement has the same impact on the sustainable retirement standard of living as working a single month longer.
Update: I read the full paper and here’s my view. For most households earning less than $100,000 a year with average savings rates, Social Security changes matter more than returns on investment portfolio. What really matters is delaying Social Security and getting the resulting higher monthly income for life. For most people, that’s the same as working longer as they can’t just wait around without a paycheck.
If you are close to retirement, chances are that working longer is the best practical solution to improving your financial outlook. Working longer means your portfolio grows a bit more hopefully, your Social Security check gets bigger, and your retirement length gets shorter (annuities pay more).
However, if you are young, it is quite easy to tell yourself today that you’ll simply work a bit longer far in the future. When the time comes, you may not be given the option of working longer either due to job loss or disability. If you take this too far, you could just tell yourself that you’ll simply work until you die and you won’t have to save anything at all.
You can pay $5 for the full paper, or you may be able to get free access if you have a .edu or .gov e-mail address.
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Read More: Study: Working Longer vs. Saving More