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Strategies for a successful retirement
The Benefits and Considerations of Working Later in Life
As people live longer and healthier lives, retirement is no longer a one-size-fits-all experience. While the average American worker typically retires around age 61, often due to health issues, layoffs, or simply the desire to take a break, the trend of working well past the traditional retirement age is on the rise.
According to Pew Research, 19% of adults aged 65 and older are still employed, nearly double the percentage from 1987.
Why More People Are Choosing to Work Longer
For many, retirement isn’t just about leisure—it’s a new chapter of life. Working later allows individuals to explore their passions, whether by continuing their current job, starting a second career, or launching a new business venture.
Beyond financial incentives, staying employed offers significant mental health benefits, helping to stave off issues such as dementia, heart disease, and even cancer by keeping the brain active and offering a sense of purpose.
How Working Longer Helps Financial Security
Boosting Your Savings and Retirement Plans
The risk of outliving savings is a growing concern as life expectancy increases. For instance, a man has an average life expectancy of 82, while a woman’s life expectancy extends to 85.
With many people living into their 90s, continuing to work later in life helps protect against depleting retirement savings. Income from work means you won’t need to tap into your savings as early, preserving them for the future. Even part-time work that covers some expenses can prevent you from using your nest egg prematurely.
Additionally, by working longer, you have more time to contribute to retirement plans, and any employer match you receive can provide a significant boost to your savings. Workplace benefits such as health insurance, dental coverage, and gym memberships may also become available, making retirement more affordable.
Accessing Government Programs and Benefits
Working past 65 provides more opportunities to qualify for important government programs. Before you turn 65 and can join Medicare, you’ll need health insurance, which can be expensive, especially if you’re purchasing through the Affordable Care Act (ACA). ACA plans are income-based, but the premiums can still be steep, and you’ll need to budget carefully before transitioning to Medicare.
Social Security benefits are another consideration. The full retirement age for Social Security is between 66 and 67, depending on birth year. Although you can start taking Social Security as early as 62, delaying it until 70 increases your monthly check for life.
Navigating the Drawbacks of Working Beyond Retirement
While there are clear benefits, working later in life isn’t without challenges. Here are a few important things to keep in mind:
Impact on Social Security Payments
Once you start receiving Social Security, earning income can temporarily reduce your benefits. For example, if you’re younger than the full retirement age, you could earn up to $22,320 in 2024 without affecting your benefits, but anything above that will result in a reduction. In the year you reach full retirement age, you can earn up to $59,520 before the government starts reducing your payments.
However, the reduction isn’t lost money—it’s carried forward, meaning you’ll receive a larger check later in life. Still, unexpected adjustments to your budget can occur if you were counting on both work income and Social Security benefits.
Medigap and Workplace Health Coverage Risks
If you’ve opted for a Medigap plan to cover Medicare out-of-pocket costs, be cautious when leaving for a new job with health insurance. Medigap plans guarantee enrollment only the first time you join Medicare. After that, insurers may use medical underwriting, which can lead to denial due to pre-existing conditions. You could consider Medicare Advantage plans, but they typically offer less coverage than Medigap.
Required Minimum Distributions (RMDs) Still Apply
Once you turn 73, you must begin taking required minimum distributions (RMDs) from pre-tax retirement accounts, including traditional IRAs and 401(k)s. If you’re still working, you can delay RMDs from your current workplace plan, but you’ll still need to take them from older accounts. If possible, rolling over funds into your current workplace plan could help delay taxes.
Navigating the Modern Workplace Landscape
A Tight Labor Market Benefits Older Workers
The unemployment rate has been around 4% for a while, creating a highly competitive job market where older workers are increasingly valued for their experience. Many positions today require higher education and are less physically demanding, making them more suitable for older employees. Additionally, seasoned workers can play an important role in mentoring younger colleagues.
Age Discrimination: Still a Concern
Despite the growing demand for older workers, age discrimination remains an issue. According to AARP, 64% of workers aged 40 or older have encountered age discrimination. Job seekers over 55 also face higher unemployment rates than their younger counterparts. To combat this, updating your resume to focus on relevant skills and experiences, and becoming proficient with tools like LinkedIn and video conferencing software, can improve your chances of landing a job.
Flexibility and Benefits for Older Workers
New Workplace Benefits and Remote Work
As more companies embrace remote and hybrid work, older employees have better opportunities for work-life balance. Employers are also offering attractive perks, such as long-term care insurance, caregiving leave, and even paid grandparent leave, to entice older workers to stay employed or return to the workforce.
Exploring Non-Traditional Work Options
Work doesn’t have to be in the form of a full-time job. Many older workers turn to consulting, gig work, or even starting their own business to stay active and earn money while enjoying greater flexibility. Volunteering is another fulfilling option that offers similar mental and social benefits.
Striking a Balance Between Work and Retirement
Finding the Right Work-Life Balance
When planning for your later years, it’s essential to communicate with your spouse or partner about your work goals and ensure there’s still ample time for vacations, hobbies, and family activities. Don’t forget to listen to your body—finding a pace that supports your health is key to making work an enriching experience, rather than a burden.
Ultimately, working past the typical retirement age can be a rewarding choice, offering both financial stability and personal fulfillment.
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