For many retirees, completely leaving their profession behind when they PIVOT away from the full-time workforce is undesirable for many reasons, and the question of how to structure your day in retirement needs to be addressed. Americans are living longer than ever, and with this advancement comes the reality that most workers will live well over a decade past retirement, meaning they need to support themselves financially longer than retirees in earlier decades.
Retirees today who would prefer to work in some capacity after retirement care about more than earning enough to support their retirement spending levels. Many seek fulfillment and meaning through part-time work after retirement.
Retirement Ages and Life Expectancies
According to the U.S. National Center for Health Statistics, the average life expectancy for an American is almost 79 years on average (about 81 years for women and 76 years for men). Many Americans retire at 62, which is the first year that retirees qualify to receive Social Security benefits, and others retire at full retirement age, which is between 65 and 67, depending on the retiree’s birth year.
Retirees can look forward to almost two more decades on average, during which they will need to support themselves financially as well as emotionally through finding meaning and direction in their lives. Finding (or creating) the ideal part-time job can meet both these needs.
Working After Retirement
People find meaning and purpose in work, and retirees often find that the lack of a formal job does not necessarily equate to increased happiness. Fortunately, those who experience this may be able to find a part-time position that requires the tasks that the retiree found fulfilling when working full-time while reducing or eliminating unwanted tasks.
Retirees also have decades of knowledge in their industry, yet many companies do not effectively capture this knowledge before their employees retire. Without retirees themselves sharing what they have learned over the course of their career, this accumulated knowledge could be lost to future generations.
Finally, working after retirement can support an increased spending level, as well as a decreased need to spend retirement savings. Retirees who began retirement planning late can make up for a shortfall by working past their traditional retirement age, while retirees who have saved enough to support themselves financially may now desire to support their loved ones (such as their children or grandchildren) or to provide greater financial contributions to charities they value.
Tax and Social Security Implications of Working After Retirement
All retirees have the option to defer their Social Security payments, which allows them to collect higher monthly payments in future years. Retirees who begin claiming their Social Security benefits at their full retirement age (65 to 67) or later will not have their Social Security payments reduced and can receive both employment income and Social Security income every year.
However, for retirees who filed for Social Security as early retirement (meaning they filed between age 62 and their full retirement age), their Social Security payments for any given year may be reduced or eliminated, depending on how much the retiree earned that year (for 2018, any income over $17,040 will reduce benefits at a rate of $1 lost in benefits for every $2 earned over that limit).
Early retirees who have already begun receiving Social Security benefits can suspend payments (and repay all benefits paid out) within 12 months of filing for Social Security, and retirees who have reached full retirement age can suspend benefits at any time. This deferral allows retirees to accrue delayed retirement credits and receive the maximum benefit level when they turn 70.
For those retiring at full retirement age, the restrictions on the maximum income that is allowed to receive Social Security benefits will not apply, but early retirees will need to decide whether and how much to work part-time before they reach full retirement age. One option is to continue to collect early retirement Social Security payments and live off retirement savings until the retiree reaches full retirement age, and at that point, begin working again. Alternatively, early retirees who expect to earn more than their Social Security benefits may choose to work, accepting that they will forfeit some or all of their Social Security benefits during the years before they reach full retirement age.
Establishing how to structure your day in retirement is an important question to ask before pulling benefits.
Types of Employment Post-Retirement
Many retirees return to their former industry by providing consulting skills, either advising individuals and teams or the company itself on how to solve specific problems or operate more efficiently. Some retirees work on a freelance basis, meaning they set their own prices, seek out clients and manage the entire consulting process themselves, while others work for consulting providers or staffing agencies, providing consulting with oversight from a consulting-specific organization. Overall, consulting allows retirees to work as much or as little as they would prefer, as retirees can choose how many projects to accept.
Other retirees provide training or tutoring on skills they gained during their working years, such as proficiency with a language, type of software or specific topic. Retirees who work as freelance creators might find work writing articles about their industry for trade magazines or websites or through designing products or other deliverables.
Retirees who are looking for work should keep their LinkedIn and any other professional job profile sites current and register with job placement websites or consulting agencies that specialize in placing experienced workers. Businesses frequently seek part-time or temporary employees with experience that only those with many decades working in an industry can provide. However, retirees who can provide this experience may be difficult for headhunters and businesses to find, and retirees should identify themselves as available for part-time opportunities in order to have the best chance of finding a suitable position.
Conclusion
Working during retirement can be much more than an unpleasant necessity to increase one’s retirement savings. With planning, an experienced retiree can find challenging, meaningful job opportunities while generating income that offsets retirement spending expenses and maximizes the retiree’s quality of life, ultimately making his or her retirement years financially comfortable and emotionally fulfilling. Talking with a financial advisor early is recommended to help ensure you’re on the right track.
Contact PAX Financial Group to discuss your specific goals and situation.
This material is provided by PAX Financial Group, LLC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The information herein has been derived from sources believed to be accurate. Please note: Investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results.
