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Vanguard Says Working Just 1 More Year Could Boost Your Retirement Income 15%

This strategy could give you more to live on in retirement.

By Chris Lewis, CEPF , Edited by Laura Hohenstein

Updated Aug. 13, 2026

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Many of us look forward to retirement and may even have a target date circled on a calendar somewhere. But what if moving that date, even by just a year, could seriously change the trajectory of your retirement plan?

In recent Vanguard research, that's what the data shows, and it's not just a little difference. Learn the three ways working longer encourages growth, and what it means for Social Security benefits and withdrawal rates.

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Why one year makes a difference

The concept of a delayed retirement might not be new, and for some, it can help them be more ready for financial realities that happen when you age. When you work longer, you are still earning, still saving, and not yet taking from your nest egg, so it continues to grow untouched.

Instead of starting withdrawals right away in retirement, you could be letting them grow and adding fresh money. A single year of this strategy may give you up to 15% more to live off of when you do stop working.

The three compounding effects here are delayed withdrawals, another year to contribute, and an additional year of growth. You just can't find this powerhouse combo with any other strategy.

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Social Security is the biggest lever

But you're not just delaying withdrawals from your investment accounts. When you work another year, you can delay Social Security another year, too.

Vanguard frames Social Security benefits as effectively the cheapest annuity available, because delayed claiming increases the monthly payment you'll eventually get. Generally, this is an additional 8% for each year you delay benefits past full retirement age (FRA), until you turn age 70.

Because claiming at 62 can reduce benefits by about 30%, timing alone can matter more than small changes in investment performance.

Who benefits most from this strategy

While anyone can add to their nest egg by working another year, it's most life-changing for those with smaller safety margins. People who are still a few years away from their ideal retirement number have time to put this into practice, and it can move a retirement from feeling tight to comfortable.

Those with large retirement portfolios and who don't need the extra breathing room may not care as much, especially if they are retiring by choice rather than necessity. The extra cash might be nice, but it's not a powerful, essential strategy for the life they want.

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Why two years can matter more

Even though this article is about a single year of extended earnings, why not consider two? Vanguard found that it closes the shortfall for many people who can't quite get there in one. And that simply makes sense: Two years gives you more runway to save and more time to compound.

This additional year also delays Social Security even further, contributing to those larger monthly benefit payments and keeping you from withdrawing more than your portfolio can withstand. If your target amount is a long way off, two years reduces the risk of retiring with too little room for market downturns, inflation, or health care surprises.

How to test your own numbers

It can be confusing to go from "maybe I'll have enough" to "let's work two more years", and the true strategy for you may actually be something in between. Instead of guessing, run three models to see how they stack up: retiring now, retiring in a year, and retiring in two years.

Compare the total retirement income, savings remaining, and Social Security benefit to see which is most likely to support you. Vanguard says around 3.5% to 4% of portfolio withdrawals after guaranteed income may support a 30-year retirement, so use realistic assumptions about your eventual withdrawal rate.

Be sure to take your and your spouse's health, which can increase projected costs, into account with these figures.

Keep a cash bucket

Vanguard also recommends keeping 12 months of planned withdrawals in a cash or cash-like investment you can easily access as part of a practical spending plan. This keeps you from having to dip into your portfolio if the markets take a hit. You won't need to sell off assets to meet your minimum bills and obligations.

This is especially important in early retirement, where market losses can be more damaging. You have less time to recover in a dip, so it's important not to sell off investments if at all possible.

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The bottom line

In order to meet your retirement goals, Vanguard recommends drawing from taxable accounts first, then tax-deferred, and finally tax-free accounts. This is because the order of withdrawals changes how long your money will last. Ideally, you'll want tax-advantaged growth to last as long as possible.

Not everyone should work longer, and for some, health or career changes have made the decision for them. If you're within a few years of retirement and can choose, run the numbers to see if working longer can work for you.

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