By Lee Sherman
Retiring doesn’t have to mean giving up your day job. Many people continue to work at least part time; to supplement their income, stave off boredom, or to provide a sense of purpose. While you might be anticipating your sunset years, there are many advantages to either holding off on retirement for as long as possible or continuing to work long after you retire.
The recent coronavirus pandemic may have you rethinking your retirement strategy, either because your portfolio has lost much of its value, or because you are currently living off your emergency fund. Add to this the fact that the average life expectancy continues to increase, and working in retirement might even become a necessity. Unlike your parent’s generation, if you’re expecting to retire at age 65, you may find that you’ll need to make your savings last 25 years or more. Not only that, but between inflation and the rising costs of long-term care, your savings won’t go as far as you may have thought.
Financial advisors often recommend against early retirement and for continuing to work for as long as you feel you can. Instead of retiring at 65 (when you become eligible for Medicare), consider waiting until 70 before receiving Social Security benefits, especially if your partner is much younger. Retiring early can see your benefits reduced by as much as 30% depending on when you were born. But waiting means you will have paid more into the system, meaning that your monthly Social Security check should be larger. You could as much as double the amount available to you in retirement.
If you do decide to keep working even after 70, there is no cap on how much additional income you are allowed to earn while still receiving benefits. But there may be some tax considerations so always consult your tax advisor.
For most retirees, health insurance is the biggest concern (and biggest expense). You are probably aware that you qualify for Medicare starting at age 65 but you may be in for sticker shock when you see how much you’ll still have to pay for out-of-pocket expenses such as prescription drugs. Continuing to work can help by making it possible for you to afford supplemental insurance to cover the gaps in Medicare coverage.
Besides providing for your physical health, having a job (even one that only takes up a few hours of the day) can improve your mental health. As many are finding during this pandemic, having something to focus on and having regular (socially distanced) contact with other people can help you feel engaged. A couple of examples: my father, an avid photographer, started a photography business in retirement, and my in-laws ran “art tours”. Turning a passion into a second career, especially one that doesn’t require a commute, can be a satisfying and financially fruitful way to enjoy your retirement. You may even begin to look forward to those daily Zoom calls.
Lee Sherman is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Lee is an experienced journalist and editor with over 30 years of expertise with a significant history of writing in the personal finance and technology arenas.
