The “One More Year” Syndrome: The Math Behind the Golden Handcuffs
The “One More Year” Syndrome: The Math Behind the Golden Handcuffs
COACHING POINTS
- The Syndrome: Many retirees suffer from the psychological inability to pull the trigger. They reach their “Number,” but fear of market crashes or boredom keeps them working “just one more year.”
- The Math: Delaying retirement by 1 year creates a Triple Benefit: 1) You add new savings, 2) Your investments grow for another year without withdrawals, and 3) Your retirement timeline is 1 year shorter.
- The Result: This single year can increase your safe retirement income by 10-15% permanently, serving as the ultimate hedge against Sequence of Returns Risk.
Deciding to retire is often harder than saving for it. The “One More Year” (OMY) syndrome is driven by fear, but mathematically, it is the most powerful tool in your arsenal. Working one extra year doesn’t just add a year’s salary to the pile; it radically alters the trajectory of your portfolio’s survival probability. It is the financial equivalent of a “superpower.” Source: Early Retirement Now / Bigern Research
Scenario: You have $1,000,000. You earn $150,000. You plan to spend $40,000/year in retirement.
- Benefit 1 (New Savings): You save $50,000 from your salary. (Portfolio +$50k).
- Benefit 2 (Investment Growth): Your $1M grows by 7%. (Portfolio +$70k).
- Benefit 3 (Avoided Withdrawal): You don’t withdraw $40,000. (Portfolio Saved +$40k).
- Total Swing: By working one year, your net worth is $160,000 higher than if you had retired. You start retirement with $1.16M instead of $1.0M minus withdrawals.
What-If Scenario: Impact on Safety
Comparison: Retiring at 60 vs. 61 with a $1M Portfolio.
| Scenario | Safe Withdrawal Rate | Success Probability |
|---|---|---|
| Retire at 60 | 4.0% ($40,000) | 85% (Risk of failure) |
| Retire at 61 (OMY) | 4.5% ($45,000) | 98% (Virtually failsafe) |
Net Worth Swing (1 Year)
| Decision | Ending Balance ($ Millions) |
|---|---|
| Retire Now | 0.96 |
| Work 1 More Year | 1.16 |
*Retiring now depletes the portfolio. Working one more year grows it. The gap between the two outcomes is massive ($200k+).
Portfolio Survival Rate (30 Years)
| Retirement Age | Survival Chance (%) |
|---|---|
| Age 55 | 78 |
| Age 56 | 92 |
*Just one extra year of compounding and one less year of withdrawals can push a retirement plan from “borderline” to “safe.”
Execution Protocol
OMY syndrome can become a trap where you never retire. Calculate your exact FI Number (25x expenses). If you have hit it, recognize that working longer is now a choice for luxury, not a necessity for survival.
If you decide to work one more year, change your mindset. You are “Financial Independence (FI)” but still working. You can speak more freely, take more vacation, or care less about office politics. This often makes the final year enjoyable.
Without a deadline, OMY becomes “One More Decade.” Pick a specific date (e.g., “June 30th next year”) to hand in your resignation. Plan a celebratory trip for the day after to lock in the commitment.
COACHING DIRECTIVE
- Do This: Use OMY if your simulation shows less than a 90% success rate. That one year buys you peace of mind forever.
- Avoid This: Using OMY as an excuse to avoid the identity crisis of retirement. If you have 30x expenses and are still working because you are scared, you are wasting your most valuable asset: Time.
Frequently Asked Questions
Does this impact Social Security?
Yes. Working one more year often replaces a low-earning year (from early in your career) with a high-earning year in your top 35 average, slightly boosting your Social Security benefit forever.
What if the market crashes during my OMY?
This is actually the best-case scenario for OMY. If you had retired, you would have been selling low. By working, you are buying low (accumulating cheap shares) and not selling. You effectively dodged a bullet.
How do I know when to stop?
When the pain of working exceeds the fear of running out of money. Mathematically, once you hit a 3.5% withdrawal rate, working longer adds very little marginal safety.