To retire or not to retire? That is the question. Or, what about a compromise instead? What if you could enjoy a mixture of the freedom and relaxation of retirement combined with the economic security provided by employment? As many seniors reach retirement age, they discover that without work, they face a new set of problems instead. How will they continue to afford their current lifestyle? What will they do with all of their new free time? Perhaps they would be better off by continuing to work.
Building Your Nest Egg
Let’s address the most obvious benefit first: growing your nest egg. In general, retirement planners recommend that people build up enough savings to last for 25 years or more. How can you figure out what number is enough? Well, if the difference between your projected spending and retirement income (from sources such as Social Security) is about $10,000 per year, then you’ll need about 25 times that in savings. Does saving $250,000 sound like a challenge? If so, working longer is probably the best solution. You’ll have fewer years during which you’ll be drawing on your savings and you’ll also be able to continue feeding those accounts. The longer you can benefit from compounding interest and tax-deferred growth, the better.
Maintaining Your Perks
Employment occasionally offers some awesome perks. On top of your paycheck, your employer often contributes to major benefits such as your 401(k) or health insurance. If your spouse is younger than 65 and isn’t ready to retire, employer coverage may be especially valuable. Sometimes, employment may even provide you with perks such as dental care, life insurance, a pension, flexible compensation, or paid leave. If you’re on the fence about entering retirement, do your best to carefully evaluate the kinds of benefits that you might be able to expect by waiting just a little longer. For those lucky enough to receive a pension, keep in mind that, because some pension plans are based on your average earnings over the last few years, you may be able to receive a substantially better pension as long as your earnings continue to rise in the coming years. In general, working longer conveniently allows you to maintain (or even increase) your perks.
Delay Your Social Security and Other Assets
You can start collecting Social Security at age 62, but for most people, “full” retirement age lies at either 66 or 67. For every year after your full retirement age that you delay collecting Social Security, your benefits will grow by about 8%. Therefore, those who delay their collections from age 67 to 70 will receive benefits that are roughly 25% larger. In general, deferring your benefits from retirement accounts, Social Security, and other investments will allow you more time for those assets to grow. With factors like compounding interest and age-related benefits in play, you could earn significant excess income by waiting just a couple more years before using these funds.
Earning Steady Income
Retirees often struggle to find another source of stable income after leaving work. While it’s possible to sustain yourself off of investment funds, savings, Social Security checks, and other sources, it isn’t easy unless you’ve spent enormous energy to build these assets over your lifetime. If you find yourself struggling to maintain reliable monthly income after retirement, you may want to consider picking up a part-time job or other form of work that can help you make it through the next several decades without falling into debt or stressing out too much regarding money.
Lifestyle & Routine
Retirement is more than just a financial change – leaving work will change your daily schedule entirely. When most of your obligations evaporate overnight, what will you do with your time? What kinds of hobbies and activities should you pursue to fill all of these free hours? Rather than retire completely, many seniors choose to continue working in a part-time capacity so that they can maintain a consistent daily schedule. Plus, staying mentally and physically active through work won’t hurt either. Downsizing to a part-time job might also enable you to discover a new line of work or, in some cases, you could even turn your hobby into a lucrative new profession. Fixing up old cars, painting, blogging, gardening, sewing, and photography are just a handful of the many hobbies that offer the potential to let you earn some extra money at your own pace.
To help you make the decision to work after retirement, we recommend you speak to loved ones and your financial advisor.