Would Working One More Year Materially Change Retirement?
The retirement date is close enough to picture. The plan works, but perhaps only narrowly. One more year of paychecks seems likely to create a comfortable margin.
Then the question becomes more personal. Would that year materially improve retirement, or would it mostly postpone a life you are ready to begin?
A useful comparison does not treat an added year as automatically valuable. It measures what would actually change between retiring now and retiring one year later.
Why can one added year have an outsized effect?
Working longer can move several parts of a retirement plan at once. Earnings may cover another year of household spending. Savings may remain invested, and new contributions may be added. Portfolio withdrawals may begin later. Social Security or pension income may also start on a different date.
Research comparing working longer with saving more found that a few additional months of work could have the same effect on sustainable retirement living standards as decades of modestly higher saving. The study used specific assumptions, including retirement and Social Security claiming occurring together, so its results should not be treated as a household forecast. Its larger lesson is useful: the power of working longer often comes from several changes happening together.[1]
What should the comparison include?
Put the two retirement dates side by side. Then measure the difference in each of these areas:
- Savings. Count planned employee contributions and any employer contribution. For 2026, the employee contribution limit is $24,500 in most workplace retirement plans.[2] Eligible participants may also have a higher catch-up limit. Use the amount the household would actually contribute, not the maximum available.
- Withdrawals. Estimate what the portfolio would not need to provide during the added working year. Keep expected investment growth separate because a year in the market can help or hurt.
- Health coverage. Employer coverage can make an added year especially valuable before Medicare. Early retirees may otherwise need to compare Marketplace coverage with COBRA.[3] A spouse's plan or retiree benefits may offer another route. At age 65 or later, active employer coverage can also affect the timing of Medicare enrollment.[4] For a deeper look at the pre-Medicare years, see Retiring Before Medicare: Coverage and Income Timing.
- Benefits. Social Security uses up to 35 years of earnings, so another strong earnings year may replace a lower year. Waiting to claim between ages 62 and 70 can also increase the monthly benefit.[5] Those are separate effects and should be estimated separately. Social Security at a Crossroads: Start Now or Build a Bigger Lifetime Benefit? examines the claiming tradeoff more closely.
- Taxes. Another year of wages may preserve retirement contributions, yet it may also postpone a lower-income tax-planning window. Compare after-tax cash flows for both dates rather than assuming the later date always yields a tax advantage.
- Life timing. Give the year itself a value. Consider your health and energy. Then weigh caregiving or work demands against what retirement would make possible. This belongs beside the financial difference, not outside it.
Dovetail Principle: The Numbers Should Clarify the Decision, Not Promise the Future
The comparison should reveal which variables drive the result. It cannot prove what markets or health will do. Tax rules and life can change too. A useful model makes the important difference visible and keeps uncertain assumptions open for review.
Which changes are large enough to matter?
The total dollar improvement matters less than what it changes for the household. One year may be material if it closes a health coverage gap. It may also matter if it delays a large portfolio withdrawal or meaningfully increases dependable income.
Other variables may barely move. A contribution can be meaningful in dollars while remaining small relative to the portfolio. Another earnings year may not change Social Security much, given that the earnings record already includes 35 stronger years. Working past 70 does not create additional delayed retirement credits.
Look for the two or three differences that change future flexibility. If the later date only makes an already workable plan slightly stronger, the added margin may not justify giving up the year. If one specific gap disappears, the year may have a clear job.
Can the plan depend on a year that may not be available?
An additional working year is still an assumption. In the 2026 Retirement Confidence Survey, 46% of retirees reported leaving the workforce earlier than planned. Health problems, disability, and workplace changes were common reasons.[6]
That does not make the year unusable in the comparison. It means the household should also see what happens if work ends six months early. A plan that survives that test may offer more flexibility than one that requires the full year to go exactly as expected.
What decision should the comparison help you make?
Begin with the marginal question: what does one more year change that retirement now would not?
Then compare that financial improvement with the human cost of waiting. The answer may support another year, retirement now, or a separate review of a shorter transition. The purpose is to identify the variable that carries the decision.
A comparison of the two dates is most useful inside a broader retirement planning review. That review can connect income and coverage with the life the household is moving toward.
Related Reading: Before You Pick a Retirement Date, Make the Pieces Work Together. This article shows why the retirement date should be reviewed alongside the other decisions it affects.
About the author
Ross Marino, CFP®, CeFT®, is the Founder & CEO of Dovetail Financial and creator of Human-First Financial Guidance®. He helps people nearing or living in retirement connect their lives and wealth so that financial decisions become clearer, more personal, and easier to navigate.
Notes
- The Power of Working Longer, National Bureau of Economic Research, Working Paper 24226, January 2018.
- 401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500, Internal Revenue Service, November 13, 2025.
- Early Retirees Must Fill a Health Insurance Gap, AARP, updated January 9, 2026.
- Working past 65, Medicare.gov.
- Your Retirement Benefit: How It's Determined, Social Security Administration, Publication No. 05-10070, May 2026.
- 2026 Retirement Confidence Survey: Expectations About Retirement, Employee Benefit Research Institute and Greenwald Research, April 2026.
Disclosure
This content is provided by Dovetail Financial Group LLC (“Dovetail Financial”) for informational and educational purposes only. It is not intended as, and should not be construed as, individualized investment, tax, legal, or accounting advice; a recommendation to buy or sell any security; or a recommendation to adopt any investment strategy. Because each person’s situation is unique, readers should consult their own financial, tax, and legal professionals before taking action based on this content. Information contained herein is believed to be reliable, but its accuracy or completeness is not guaranteed. Any opinions expressed are current as of the date of publication and are subject to change without notice. All investing involves risk, including the possible loss of principal. Asset allocation and diversification do not guarantee profits or protect against losses in declining markets. Past performance is not a guarantee of future results.
Dovetail Financial Group LLC is a registered investment adviser. Registration does not imply a certain level of skill or training. Additional information about Dovetail Financial Group LLC, including Form ADV Part 2A and Form CRS, is available at adviserinfo.sec.gov. © 2026 Dovetail Financial Group LLC. All rights reserved.
