Should You Work One More Year Before Retiring?
Working just one more year before retiring could permanently increase your retirement income. Not just because of one more paycheck, but because it could mean higher Social Security benefits, less pressure on your investments in the early years, more tax flexibility, and a meaningfully stronger long-term plan.
But there's another side to that decision. Working one more year can also cost you something you can't get back: time. In this video, we walk through both sides of the numbers and the honest questions that don't show up on a spreadsheet.
If you're trying to determine whether you're truly ready to retire, you may also find our video on what retirees with $1M+ wish they knew before retiring helpful.
What Working One More Year Can Do for Your Retirement
The financial case for working one more year is often stronger than people realize, and it goes well beyond the extra paycheck.
One More Year of Savings and Delayed Withdrawals
Another year of salary means another year of contributions, debt payoff, and reserve building. But more importantly, it means one more year without pulling income from your portfolio. The early years of retirement are the most financially sensitive. If markets drop while you're withdrawing, it creates long-term pressure on your plan that's difficult to recover from. Working one more year reduces that sequence-of-returns risk.
If you're concerned about retiring into a market downturn, you may also find our guide on what to do if you retire and the market drops helpful.
A Permanently Higher Social Security Benefit
If you're in your peak earning years, one more strong income year can replace a lower one in your 35-year calculation, permanently increasing your monthly benefit. And if you delay claiming Social Security beyond your full retirement age, your benefit grows even further. That increase lasts for the rest of your life and, for married couples, affects the survivor benefit as well.
Healthcare Coverage Before Medicare
If you're retiring before age 65, one more year of employer-sponsored health coverage eliminates a significant and often underestimated gap. Individual health insurance before Medicare can be expensive and unpredictable. One more year of employer coverage buys you time and removes a major unknown from the transition.
What Working One More Year Can Cost You
The financial benefits are real. So is what you give up. And this is the part that doesn't show up on a spreadsheet.
You can earn more money. You cannot earn more time. Health, energy, and the ability to do the things you've been planning to do in retirement aren't guaranteed to be there in greater supply next year than they are today.
The honest questions worth sitting with: Are you still finding meaning in your work, or are you pushing through it? Is your health strong right now and do you want to travel or be active while it is? Is your spouse already retired and waiting? Is your hesitation coming from genuine financial concern or from fear of the transition itself?
Some clients look back and say they're glad they worked one more year. Others say they wish they hadn't waited. There's no universal answer. There's only the answer that fits your numbers and your priorities.
How to Measure What One More Year Actually Changes
The right way to approach this decision is to measure what one more year concretely changes in your retirement picture, then compare that to what you're giving up.
Does it meaningfully increase retirement income? Does it reduce long-term withdrawal pressure? Does it improve tax coordination and Roth conversion opportunities? Does it solve a healthcare gap?
If the answer to most of those questions is yes and the improvement is significant, working one more year may well be worth it. If one more year barely moves the needle on any of those dimensions, that's equally important to know. You may already be ready.
For a deeper look at evaluating whether your retirement plan can withstand market declines, inflation, healthcare costs, and taxes, see our retirement stress test guide .
Frequently Asked Questions About Working One More Year vs Retiring Now
Should I work one more year before retiring?
It depends on what one more year actually changes in your retirement picture. If it meaningfully increases your Social Security benefit, reduces withdrawal pressure on your portfolio, fills a healthcare gap before Medicare, or significantly improves your long-term income flexibility, the financial case may be strong. If one more year barely moves the numbers, you may already be ready to retire. The right framework is to model both scenarios side by side, compare the financial difference, and weigh that against what you're giving up in time, energy, and the life you're ready to start living.
How does working one more year affect Social Security?
Social Security benefits are calculated using your 35 highest-earning years. If you're currently in your peak earning years, one more year of strong income can replace a lower-earning year in that calculation and permanently increase your monthly benefit. Additionally, every year you delay claiming Social Security beyond your full retirement age increases your benefit by approximately 8% per year up to age 70. That increase is permanent and applies to survivor benefits for a spouse as well. For many people, the Social Security impact alone makes a meaningful difference in lifetime income.
What is sequence of returns risk and how does working longer help?
Sequence of returns risk is the danger that a significant market decline in the early years of retirement, when you're actively withdrawing income, can permanently damage your portfolio's long-term sustainability. Early losses combined with withdrawals reduce the base that future growth works from. Working one more year delays the start of withdrawals and gives your portfolio additional time to grow, reducing exposure to a bad sequence at the most vulnerable moment in your retirement plan.
How do I know if I'm financially ready to retire?
Financial readiness for retirement depends on whether your projected income sources, Social Security, any pension, and portfolio withdrawals, can sustainably cover your expenses throughout retirement while accounting for inflation, healthcare costs, and longevity. A retirement income plan that stress-tests your withdrawals against realistic market and inflation scenarios is the most reliable way to answer that question. Without that analysis, most people are either guessing they're ready or delaying unnecessarily out of fear rather than financial need.
What happens to healthcare if I retire before 65?
Medicare eligibility begins at age 65. If you retire before then, you'll need to find alternative coverage, typically through COBRA continuation of your employer plan, a marketplace plan through the ACA, or a spouse's employer plan if available. Individual health insurance before Medicare can be expensive, and coverage options vary significantly. One more year of employer-sponsored coverage eliminates that gap entirely and removes a major financial unknown from the retirement transition.
Is retiring early ever the right choice even if the numbers aren't perfect?
Yes. Retirement timing isn't purely a financial optimization problem. Health, energy, personal priorities, and the life you want to live are all legitimate factors. Some people retire early with numbers that aren't perfect and find they have more control over spending than projected, or that a part-time arrangement fills gaps they hadn't considered. Others work longer than financially necessary and later wish they hadn't. The goal is to make the decision with clarity about the trade-offs rather than from fear in either direction.
How much does one more year of work actually increase retirement savings?
The impact varies significantly depending on your income, savings rate, and portfolio size. Beyond direct contributions, one more year means one more year of portfolio growth without withdrawals, a potentially higher Social Security benefit, and additional time for tax planning moves like Roth conversions. For some people the total combined impact of one more year is modest. For others, particularly those with large portfolios where sequence of returns risk is a real concern, or those close to a Social Security claiming threshold, the cumulative effect can be substantial. Modeling it specifically for your situation is the only way to know.
Want a Clear Picture of Your Retirement Readiness?
Take our free Retirement Readiness Assessment. It takes less than a minute and gives you a high-level view of your retirement readiness across income, investments, taxes, healthcare, and overall planning.
Investment advice is offered through Bayntree Wealth Advisors, LLC, an SEC-registered investment adviser. Insurance and annuity products are offered separately through Bayntree Wealth Advisors. Bayntree does not provide, and no statement contained herein shall constitute, tax or legal advice. You should consult a tax or legal professional on any such matters. Opinions expressed herein are solely those of Bayntree Wealth Advisors. All content is for informational purposes only and is not intended to provide the basis for any financial decisions.
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