Nest eggs shrank in 2022. But does 1 more year of work really matter for retirement safety? Here are the 3 big ways working longer can benefit you

The post-pandemic market downturn has taken its toll on retirement nest eggs.

The average 401(k) balance took a 23% dive year over year in November 2022, according to data from Fidelity.

Those losses likely led many older Americans who’d been otherwise eyeing retirement to stay in the workforce instead.

That’s an understandably depressing result, but the news isn’t all bad. There are numerous and significant benefits to extending your working years.

Sticking around can make you happier, slow the cognition and social declines often associated with aging and, of course, add all-important financial reserves that will come in handy when you actually call it quits.

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Reap the returns of staying invested for longer

Staying in the workforce delivers the most direct benefit: a steady paycheck that meets your daily obligations while – provided you contribute to a 401(k), Roth IRA or similar retirement plan – keeping you invested in the market. Delaying distributions from your plan not only keeps you buying shares, but it positions your portfolio to capitalize on a market rebound.

And if you’re hanging around, you’re most likely not yet tapping your Social Security benefits. That’s huge because the program rewards those who wait. While seniors are eligible to tap into their Social Security benefits at 62, delaying will gain you increasingly more money per month.

Suppose you wait to apply for Social Security until the full retirement age. (It is worth noting that for anyone born in 1960 or later, the full retirement age is 67.) If you wait until then, you can get a delayed retirement credit of up to 8% of your yearly benefits on top of the maximum benefit amount.

Offset the high cost of health care

Delaying retirement will likely keep you enrolled in your employer’s health insurance plan.

Putting off the higher costs of health care often associated with aging makes good financial sense: According to the Fidelity Investments annual Retiree Health Care Cost Estimate, an average 65-year-old couple in 2022 will need about $315,000 to cover health care costs in retirement, while long-term care looms as an additional and significant cost.

To help offset this high cost, you could stay active by staying in the workforce.

Active workers – such as teachers, or corporate employees on project teams in office settings – are highly engaged and stimulated by their work in ways that activate their brains and provide routine and purpose, thus forestalling isolation and other adverse effects of aging.

Work friends (with benefits)

The adage “If you love what you do, you’ll never work a day in your life” is an adorable but simplistic summary of satisfying work. But as corny as it sounds, the saying resonates with older workers who derive deeper meanings from their occupations beyond a paycheck.

Many seasoned workers are stimulated by the daily grind and value interactions with colleagues and the opportunities to teach their skills to others.

Older employees also get social benefits: A study by Cornell University and Syracuse University researchers found that workers who stayed in the workforce into their older years developed larger social networks. In retirement, daily interactions at the office are often replaced by leisurely but lonelier pursuits that can lead to feelings of isolation, researchers say.

“Even disliked colleagues and a bad boss, we argue, are better than social isolation because they provide cognitive challenges that keep the mind active and healthy,” researchers noted in a National Bureau of Economic Research study on the benefits of working longer.