Client Material: The Potential Benefits and Features of Working Longer

Deciding when to retire is a personal choice your clients will make based on many factors. How they plan for that day can be both exciting and stressful with many complex questions. Share this piece with clients to help answer key retirement planning questions.

Thinking about retirement can be exciting. It’s an opportunity to travel more, take up new hobbies and spend more time with loved ones. Yet, planning for retirement can also be stressful with many complex questions: Have I saved enough? How long do my assets need to last? What about health insurance? Am I ready to leave the workforce and my career?

What’s the Best Age to Retire?

While good saving and investing habits are critical components of retirement lifestyle and income, one of the most powerful tools participants have is deciding at which age to retire. Working longer has some obvious pluses, such as salary, employer benefits coverage and more time for assets to grow. Other pluses may be less apparent, such as the impact on Social Security payments and how a later retirement date can affect withdrawals from retirement accounts.

The hypothetical example below shows the impact that working longer could have on retirement savings. We looked at four participants, all age 60 and with a 401(k) account balance of $500,000. Each is projected to retire at a different age, and, as you can see, working longer could have a significant effect on the person’s account balance. Youshi, Melody and Valentina saved more, both via their savings and employer contributions, than Jeff did, and their accounts had more time to grow.


  • Starting age: 60
  • Account balance: $500,000
  • Salary: $80,000
  • Annual salary increase: 2.0%
  • Employee contribution amount: 6.0% of pay
  • Employer contribution: 4.5% of pay
  • Annual investment returns: 6.0%
  • Assumed life expectancy: age 85

Account Balance at Retirement

Account Balance

Why is Youshi’s account balance so much larger than the others?

  • More savings: Youshi contributed to his retirement account over a longer period.
  • More employer contributions: Youshi received an employer contribution for a longer period.
  • More compounding: Youshi’s savings grew for a longer time.

Translating Account Balances Into Retirement Income

Account balances are only one part of the story. What really matters is how much income a person will have in retirement along with expenses. Understanding Social Security and its impact on retirement income and the surviving spouse is critical. For many prospective retirees, the Social Security full retirement age (FRA) is 671. Social Security benefits may begin at 62; however, claiming Social Security before your FRA reduces benefits2. On the other hand, after you reach FRA, your retirement benefits grow by 8% per year until age 703. If you are married and you are the higher earner, at your death, your surviving spouse may step up to the benefit you were receiving.

Another important factor in the retirement date equation is Medicare health-care coverage. Medicare coverage is available at age 65. Retiring before 65 may mean paying health-care costs out of pocket. 

Going back to our four hypothetical pre-retirees, we estimated their potential retirement income from their 401(k) balances (bright blue bar in chart below) and added in their Social Security benefits (dark blue bar). Next, we determined the percentage of their pre-retirement income that would be replaced by this income (gray boxes), often called a retirement income replacement ratio. Not surprisingly, working longer and letting Social Security benefits grow could result in a significant increase in annual retirement income and a corresponding increase in income replacement at the later retirement ages.

Estimating Annual Retirement Income 

Key Takeaway

Deciding when to retire is a personal decision based on many factors, such as health, financial goals and needs, and working longer is not always possible. However, those who have some flexibility may want to consider weighing the pros and cons of working in retirement as a part of the retirement planning process.

These hypothetical examples are for illustrative purposes only and are not intended to predict the returns of any investment choices. Rates of return will vary over time, particularly for long-term investments.

There is no guarantee the selected rate of return can be achieved. Any investments may have fees and expenses that are not taken into account, which would lower the performance. Regular investing does not ensure a profit or protect against loss in declining markets.

Social Security income estimates from Social Security Online as of September 2022. Amounts shown represent payment in first year of retirement, and would be subject to Social Security cost of living adjustments (COLAs) in subsequent years.

Keep in mind that all investments, including mutual funds, carry a certain amount of risk, including the possible loss of the principal amount invested.

1 Social Security full retirement age (FRA) is age 66 for anyone born 1943 through 1954. It increases by two months for every year from 1955 through 1959. FRA is 67 for anyone born in 1960 or later.

2 Social Security retirement benefits are reduced by 6.67% per year for the first three years prior to FRA and 5% per year for the next two years, resulting in a total reduction of 30% at age 62 for a retiree with an FRA of 67.

3 Social Security retirement benefits are increased by 8% per year after FRA, resulting in a benefit increase of 24% at age 70 for a retiree with an FRA of 67.

The views expressed are those of MFS and are subject to change at any time. These view are for informational purposes only and should not be relied upon as a recommendation to purchase any security or as a solicitation or investment advice from the advisor. No forecast can be guaranteed.

MFS does not provide legal, tax, accounting or Social Security advice. Individuals should not use or rely upon the information provided herein without first consulting with their tax or legal professional about their particular circumstances. Any statement contained in this communication (including any attachments) concerning U.S. tax matters was not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code. Contact the Social Security Administration at 1-800-772-1213 or go to to determine the benefits that may be available to you and your spouse.