Are you looking forward to retirement, dreading it, or somewhere in between? If you are in one of those last two categories, you may want to work past the traditional retirement age. Moreover, even if you are looking forward to retirement, you may be doing so because you want to start a second career in a different field.
There are a considerable number of advantages to working into your retirement years, either full or part time, such as:
- Income – Obviously, increased income is a positive. Even part-time income takes pressure off of your retirement funds and provides a cushion against unexpected expenses. However, you do have to watch your income carefully to avoid affecting your Social Security benefits or pension plans.
You have to manage your income through the Social Security transition period from 62 to full retirement age (FRA, either 66 or 67) to avoid having benefits reduced, but once you reach FRA, you can earn all you want without affecting benefits. If you can live off the income from your job, you can also delay drawing benefits until age 70, earning credits that will increase your benefits when you do begin to draw.
As for taxes, you have to manage all sources of income such as IRA distributions, annuities, and Social Security benefits to avoid higher taxes – but that is not a bad problem to have.
- Benefits – A job with benefits such as healthcare coverage and a 401(k) plan is quite valuable. With health benefits, you will not necessarily be dependent on Medicare for all of your care (although you will need to sign up at the appropriate time).
401(k)s are especially useful, since you can continue to make pre-tax contributions beyond age 70-1/2 and are not required to take distributions while employed. This is a significant advantage over traditional IRAs, which require you to stop contributing and start taking minimum distributions at 70-1/2. (Roth IRAs do not have those restrictions but use after-tax dollars).
- Social Interaction – It is not uncommon for retirees to become bored soon after retirement and miss their workplace – or for retired spouses to get on each other’s nerves without their separate pursuits. If you enjoy your workplace and can still contribute, why not continue? Keep your desired sense of community and avoid feeling isolated, while earning vital income.
- Re-engagement – This is especially true if you are switching jobs at a current employer, or switching fields entirely. You may be invigorated by the new challenges of a career you always wanted to try.
There are a few disadvantages as well, such as:
- Time/Schedule Conflicts –You may have a flexible schedule but you will probably still have some restrictions. You may not be able to travel or take up hobbies and projects that you planned, or may not be able to visit far-away children and grandchildren as often as you would like.
- Stress – If you are working because you have to for economic reasons and not because you want to, you may still be dealing with work stress. In fact, that stress may be increased because of concerns about job losses and layoffs.
- Increased Taxes – More of your Social Security benefits may be taxable with higher overall income, but as mentioned before, that is a relatively pleasant dilemma to have.
Is working after retirement right for you? We can’t say… only you can answer that question for yourself. But remember that once you are out of the labor force at an advanced age, it is difficult to get back in. Therefore, be sure of your decision before you retire.
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