It is becoming more common for people to work into retirement or to start working again once retired. This may be a matter of choice or financial necessity. What are the advantages and disadvantages of working after retirement age?
The Advantages of a Working Retirement
Some people choose to work/go back to work in retirement simply because they want to keep active and would otherwise get bored. Others have no other choice if their savings don’t provide enough of an income to live on. The benefits of working in retirement may include:
- Help to keep the individual physically and mentally active.
- Access to an additional income to supplement retirement funds.
- Opportunities to allow pension funds, savings and Social Security payments to grow for a few more years without using them.
- Access to employer funded health insurance and other retirement savings benefits.
- The chance to pick a job with full-time or part-time hours that suit the individual.
There are, however, some downsides to working in retirement for some people and these should be taken into consideration before opting to continue to work or find a new job.
The Disadvantages of Working Past Retirement
Although many individuals enjoy a working retirement, some don’t. Some find it a lot harder to carry on working/find a new job as they get older. Some potential disadvantages include:
- Having to work in retirement out of financial necessity can be a strain as people get older.
- Finding a new job with hours to suit the individual can be hard as a retiree.
- Access to company benefits may involve working more hours than the individual would ideally like.
- Some pension funds may suffer if a retiree returns to work.
- Earning over a certain amount could see Social Security benefits taxed for those already claiming them.
- Some run the risk of working too hard and not being able to enjoy retirement years.
The decision to work in retirement is down to the individual. Those that do it because they actively want to are more likely to enjoy this stage of life than those that have no other choice but to work to earn more money.
Those that that are considering working in retirement may want to check on how this might affect their Social Security payments. Deferring these benefits for a few years, may, for example, give higher payments in the future which could be useful. Attending a local AARP Career Fair may also be worth doing.
Those that are not sure that a working retirement will suit them but that need some extra income may want to look at others ways of boosting their savings. Finding ways to live well on a budget may also be useful.
What to do if Retirement Savings Aren’t Enough
Many people getting close to retiring worry that the retirement savings they’ve built up aren’t going to be enough for their needs. By this late stage, however, further savings alone may not give a fast enough return. Are there other ways to improve retirement income later in life?
Five Ways to Improve Retirement Income
There are some solutions which may be useful for individuals in this situation. They could, for example, follow one or more of the following five options.
Defer retirement: Delaying retirement for a few years could allow additional contributions to boost existing savings accounts. Not making withdrawals for a few extra years could also improve on overall return on investment.
Plan on part-time working: It’s quite common for retired people to take on a part-time job nowadays. This can be a useful source of extra income and many find that it also helps keep them active and occupied.
Move home: Many people spend their retirement in larger homes than they actually need. Moving to a smaller property may free up useful cash that could boost retirement income.
Consider a reverse mortgage/equity release: Those that don’t want to move from their homes could consider a reverse mortgage or equity release scheme. This may work for some who wish to stay in their homes but access some of the equity in it to spend in retirement.
Assess spending: In some cases making retirement income stretch may involve assessing spending and cutting back to save money. Bear in mind that living costs once retired may, in any case, be lower than when working.
These solutions may not suit every individual but may be useful for some. Those considering a reverse mortgage or equity release option should, however, make sure to assess the advantages and disadvantages before committing to this kind of solution. It may also be wise to take impartial advice.
Using a Retirement Savings Calculator May be Useful
No individual or couple can begin to know how far their retirement savings will go unless they have an idea of how much they will actually be given. Whilst this may be hard to predict with 100% accuracy depending on how far they are from retirement, it may be possible to get a ball-park figure to work with.
There are plenty of free retirement calculators online that may give a useful snapshot of projected income. This may help show any shortfalls or problem areas and may give valuable help with the overall planning process. Making sure that all available retirement savings options are being used may also be a good move.