The reason: Delaying retirement increases all sources of retirement income, the researchers note, whereas saving more only improves one source — your 401(k).
Meanwhile, the impact of working longer versus saving more grows as a person gets closer to retirement. Based on their hypothetical example, working just one month longer is as powerful as saving an extra one percentage point a month for the decade before retirement.
No doubt, the impact varies depending on how much you earn, how much you have saved, and how that relates to your expected Social Security benefits.
The researchers ran the numbers for difference scenarios, including varying income levels and rates of returns, and the results were consistently the same: Working longer had the single biggest impact of any step.
Why Savings Still Matters
This isn’t to say younger savers shouldn’t aim to put away more – and sooner rather than later.
For example, boosting your savings rate from 9% to 10% annually at age 36 with a 5% annual rate of return would increase retirement income nearly 4% the researchers noted; wait until age 56 to up the ante and the effect is a 1% improvement in retirement income – or about the same as working another month before retiring.
What if you can’t possibly work longer? Consider going part time.
“You can still enjoy a little more free time,” says Bigelow, “but you might be able to earn enough to delay claiming Social Security or drawing down on your savings.”