If you’re fortunate enough to look forward to a company or state pension, retiring as soon as possible and collecting the benefit may tempt you, or you might want to collect Social Security benefits at the minimum age of 62. Before launching your golden years, consider all effects on delaying retirement and continuing to work.

First, two obvious points: Find out if you accrue extra pension benefits for extra years of service; regarding Social Security, your monthly benefits generally rise the closer you are to age 70 before you begin taking them.

For example, let’s say John becomes eligible to retire at 55 and receives a pension of $5,500 per month. If John waits until age 60 to retire, his pension increases to $7,500 per month, a considerable difference of $24,000 a year.

Recently, one of my clients asked which of the above I recommended. I asked what makes this person happiest. We then dove into possible scenarios and future goals.

After about an hour, this person — still young enough to re-enter the workforce and with the $7,500 coming in monthly — decided to delay retirement in exchange for the extra benefits.

The same can be done if you delay your Social Security benefit past normal retirement age. Postponing benefits to close to or past what the Social Security Administration terms your full retirement age can increase your benefit as much as 8 percent per year.

For each month after age 62 that you delay applying, you increase the amount of your actual benefit. When you delay applying past your full retirement age (67 for anyone born after 1960), you increase your benefit above that point — a sum known as the primary insurance amount.

These increases are Delayed Retirement Credits. With DRCs, each month you delay ups your benefit two-thirds of 1 percent, making a total increase each year of 8 percent (a little less if you were born before 1943).

Essentially, delaying pension or the Social Security benefits increases your income floor. Think of your floor as a guaranteed stream of income that never decreases throughout the rest of your life no matter what happens to the economy, the stock market or any job you take while retired.

If you need approximately $5,000 monthly for expenses in retirement and you have a $3,000 income floor (between either or a combination of a pension or Social Security), you need only find another $2,000 per month from other sources such as employment or savings in a 401(k) or individual retirement account. You may also build your floor with payout from a longevity annuity, using some of your retirement savings for the insurer’s premium.

Putting off retirement is a big decision. Talk to a competent financial professional; look at your recent Social Security statement to see how much delaying might increase your benefit and, if you get a pension, talk to your human resources department to get estimates of your payouts.

Take your time and make the right decision. Neither retirement nor the work world will go anywhere until you say.

ABOUT THE WRITER

Sterling Raskie is an independent, fee-only financial planner at Blankenship Financial Planning in New Berlin, Ill.