How much it pays to put off retirement for another 5 years

As Kiwis reinvent what it means to get older, there's no rush to stop working. Bron Maxabella does the sums to explain just how much more you can have in your pocket if you keep working for longer.

By Bron Maxabella

Everyone wants to retire as early as possible, don’t they? Not necessarily.

An increased cost of living, longer life expectancy and flexible work opportunities have all combined to make many Kiwis rethink their retirement plans.

Fact is, financially, socially and emotionally you’ll probably be better off if you stay in the workforce a little longer.

The financial benefits can be huge

The most obvious reason to delay retirement is that you’ll have more time to accrue KiwiSaver. Most of us know that KiwiSaver is an easy, low-fuss and automatic way to make sure you’re saving enough during your working years to have a decent retirement income once you are 65 and older. 

Working just 5 more years can have a huge impact on the income you’ll have in retirement.

Of course, we also have NZ Super - our universal pension scheme for all eligible New Zealanders over the age of 65. But if you tuck more away into KiwiSaver while you’re still working, you will be able to live better down the track. 

Given that NZ Super currently pays between $563.24 a fortnight up to $1043.24 (depending on your tax code and living situation) it’s easy to see the benefits of stashing more cash in your KiwiSaver today.

Check out Sorted’s KiwiSaver calculator as a helpful resource to help you plan how much you'll need to retire. It's also important to start prioritising paying down debt while you still have a steady income.

If that’s still not enough incentive to face the daily commute, there are other options. Depending on the work you do and your employer’s situation, shifting to part-time employment could be the ideal compromise. This particularly suits anyone who wants to get a feel for life as a retiree but isn’t quite ready to make the leap.

Socially you might be better off at work

Before you leap into the retirement unknown, have a think about your social networks. The older you get, the more important other people become. People with meaningful social lives live longer, have less cognitive decline, better physical health and generally report feeling happier.

Most workplaces come with the benefit of a built-in social network. As much as you can’t stand listening to Barry from accounts talk about his award-winning jumping poodle (yes, it’s a thing), he’s actually doing you a favour. Interacting with a number of casual acquaintances or ‘weak ties’ enhances your feeling of belonging and your overall quality of life.

Work offers easy access to weak tie relationships.These are the co-workers and supervisors you interact with every day, building up a huge store of shared references. The inside jokes, everyday favours and shared moments add up to a firm feeling of belonging.

When you retire, the number of weak tie relationships you have significantly reduces. While you will hopefully develop deeper ‘strong ties’ with friends and family, the loss of your easygoing, low-maintenance weak tie network can have a significant impact on your emotional wellbeing.

So, it makes sense to keep the Barrys in your life for as long as possible.

Keep clocking on for better emotional health

Older adults who have retired are more likely to experience depression than those who are still working. There are many reasons for this, however the change to social roles and loss of income are known contributing factors.

For many people, the primary cause of retirement depression is a lack of purpose. Moving from structured workdays to unstructured everydays seems exciting until you’re actually living it. The lack of routine and business hits hard for many and it’s not until the ‘holiday’ weeks become months and the months become years that you truly appreciate the role work played in your life.  

If that rings true for you, it’s worth delaying your retirement to stay in the game for as long as you can. At the very least, use the next few years to carefully plan what retirement will look like for you. Where will you live? How will you spend your days? What activities will you engage in? Who will you spend time with? Will you travel? How will you structure your time?

One last thing to consider is that retirement doesn’t have to be forever. You can ‘un-retire’, even if you've taken a lump sum from KiwiSaver or are receiving NZ Super, you can still return to work.