FINANCE IN A NUTSHELL: Should I work past retirement age?

Overall, delaying retirement for just a few years can transform an average retirement income into a better one, and the wait provides health and wellness benefits, too. Even a short delay helps a senior’s retirement readiness.

Retirement age, it seems, is relative. Some people count the days until they can close the door on a job or career. Others vow never to stop working. Our clients are inevitably trying to answer the ever-present question: When should I retire? There are some interesting trends concerning retirement schedules.

Research has shown that more Americans are saying ‘No’ to retirement and working into their 60s and beyond. It’s the “new” old age.

A 2016 New York Times article reports nearly a third of adults aged 65 to 69 are remaining in the workforce while a fifth of those aged 70 to 74 are still working. About two-thirds of these individuals have full-time jobs, defined by the Bureau of Labor Statistics as working at least 35 hours weekly.

This changing labor pattern is partly due to Americans’ expanding life expectancy. There are more centenarians now than ever — the Centers for Disease Control and Prevention report there are 72,197 Americans aged 100 years and older, which represents an increase of 44 percent since 2000.

As the typical lifespan increases, so do the chances of outliving one’s money. As a result, retirees — particularly those in good health — are staying in the workforce to offset their longevity risk. However, even those reluctant to continue working may elect to stay in their jobs longer once they see the significant financial, physical, and mental benefits attributed to delaying retirement.

Working longer increases the likelihood of a financially stable retirement. In addition, working longer helps clients compensate for shortfalls in savings that cannot provide the support their household needs in retirement.

In an article in Investment News, Jamie Hopkins and David Littell, faculty members of The American College of Financial Services, discuss how preparedness for retirement increases from 49 percent with a retirement age of 65-years old, to 85 percent with a retirement age of 70.

For those who find work to no longer be satisfying, spending discretionary income on enjoyable activities outside the workplace can provide the relief from stress while still allowing clients to gain the benefits of working longer, write Hopkins and Littell.

Benefits of Working Past Retirement Age:

Social Security benefits increase when claims are deferred.

• Individuals who claim Social Security benefits at age 62 receive substantially lower monthly payments than those who draw benefits later. Deferring Social Security benefits until the age of 70 may be possible when there’s a paycheck to cover living expenses. Claiming Social Security at 70 qualifies recipients for about 50 to 57 percent more income than claiming Social Security at age 62.

Investments and savings have more time to grow.

• Working longer allows individuals more time to contribute to their savings, which is especially valuable for employees whose companies make matching contributions to their 401(k) accounts. Often, pre-retirees can accelerate their savings rates, once college tuition bills or home improvement projects are paid off. A few additional years of work means more time to accumulate “free” money from employer contributions to retirement accounts. The higher savings rate that is possible at this stage can very effectively set people up for a better quality of life in retirement.

Employer-subsidized health insurance is more affordable.

• Since Americans under the age of 65 are not eligible for Medicare, those who retire before the age of 65 must buy health insurance in the marketplace. It’s a costly expense. More than three-quarters of retirees in their 50s and 60s spend 10 percent or more of their family income for health care. That’s more than two and a half times what those still working pay for employer coverage. Working longer allows seniors to purchase medical insurance through a subsidized group policy until eligible for Medicare. Thus, savings can go straight into their retirement investments.

Working adults have better physical and mental health.

• Studies show people who stay in the workforce are generally healthier and happier than those who are fully retired. The most recent statistics indicate the death rate from all causes for people working past the age of 65 is 11 percent lower than for those who did not work, and seniors who did work were more likely to report they were in good, very good, or excellent health. Working also provides opportunities to learn and socialize, which improves mental health and happiness. Hopkins and Littell write that many people feel better when they work, and physical and mental health decline the longer people are in retirement.

Overall, delaying retirement for just a few years can transform an average retirement income into a better one, and the wait provides health and wellness benefits, too. Even a short delay helps a senior’s retirement readiness. We all sit back in amazement as we see stories about people still working full time into their 80s or 90s. The common thread running through these reports is the happiness derived from their jobs. Yet, the people who chose to retire as mere youngsters at 62 or 65 may be enjoying life to the fullest in warm climates and sandy beaches. The choice is up to you, but the decision should be supported with a solid financial retirement package.

 

Pete Hoover was destined to be a financial advisor. He has always been intrigued by numbers and money matters. They represent captivating puzzles to be analyzed, shaped and fit into place as pictures of financial solidarity. For nearly 40 years, Hoover has tackled those financial puzzles. In 2005, he launched Hoover Financial Advisors, located in Malvern.

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