Working Longer in Retirement

Retirees are working longer for a variety of reasons -- but let's skip the social reasons for getting out of the house and working a few hours. Instead, we'll look at the financial benefits of continuing to work longer... ok?

Need to save dollars for retirement? Consider working a few extra years!

Yes, I know.. you had your heart set on a specific date... but if you aren't quite financially ready -- what's a few more years?

First, how do people get so "stuck" on a specific retirement date? As a retirement coordinator for many years, I was always surprised when someone said "I always knew I'd retire at age 60" or "I want to retire on my birthday, or my anniversary date with 20 years of service". It seems, to me, that's their retirement plan.. so did they actually plan for that retirement date or did they always just have it "stuck" in their heads, waiting for that day to quit work? Just curious....  

Reasons to Remain Working Longer

You can save more for retirement.

Most folks who choose to work longer focus on retirement as the goal. You can put away a good portion of your earnings knowing you only have a few years left to work. Make a pact to yourself, cut back on that special coffee each morning and put that bit more away... you'll thank yourself later!

Your investments have a few more years to grow.

Your IRA's and investments will grow (hopefully). You don't have to withdraw from them earlier, as you continue to work.

The closer you are to retirement, and to actually withdrawing those monies, the less risk you can take in your investments. If you lose a large chunk of your nest egg, you don't have the years to let it grow again. Anything is possible with the stock market swings, but.... the closer you are to actually using your money, the less risk you normally should take.

With the stock market hits that most of us have experienced in 2008, working longer can only HELP our finances in retirement. You can save more, let your reduced funds replenish themselves, and work longer so that you don't have to withdraw funds, yet...

Social Security payments grow as you work!

Social Security uses 35 years of earnings (not 2 years or 5 years like a pension plan) -- THIRTY FIVE YEARS!

Every year with no earnings is a ZERO year. So even if you work part time, and earn little over a whole year, it still is better than a big fat ZERO, right? (and it's one less year you pull funds from your savings accounts). It's a double win-win!

If you DO have 35 years, a year or two of part time work (at today's wages) will erase a year or two of your high school summer jobs, for example. Back when you made $3.50 per hour for a 20 hour job, two months during summer... that's ignored for a new job at the new minimum wage (or more) at today's earnings!

Besides that, Social Security increases your monthly payment the longer you wait. If you don't have a full income between pension (if any) and Social Security, think twice.. increase that lifelong payment from Social Security while you can.... you might draw it for 20, 30 years!

Yes, if you intend to retire and have enough income, start to draw your Social Security at age 62 as it takes YEARS to recover the amounts you draw from 62-65... compared to the increased monthly amount at 65 (actually age 65+ is the "full retirement age" for many boomers... and that's increasing over the years too)!

Early Retirement of the Main Wage Earner

Have you considered, as the main wage earner of the family, how an early retirement would affect your spouses Social Security benefit?

Working past "full retirement age" :

Finally, some folks are working longer, even past age 65 or whatever your "full retirement age" is, as a way to add to their nest egg. There is no longer a Social Security Earnings Limit at Age 65! You can draw Social Security (and direct deposit those payments into savings, investments, IRA's) and then live on your working wages. It's a simple way to add to your savings, while you "double dip" (wages and Social Security payments) AND your Social Security payment is increased annually (plus your bank account too!

Working Longer -- it certainly helps!