• 3 Simple ‘Working in Retirement’ Pros and Cons

    3 Simple ‘Working in Retirement’ Pros and Cons

The concept of working in retirement might sound a little strange, however many seniors choose to partially stay in the workforce. This is neither an inherently good or bad thing and like many decisions in life, it depends largely on your preferences and financial standing. But if you are considering working during retirement, it helps to know the pros and cons. 

To discover 7 Essential Questions to Ask About Full Retirement Age, visit this article.

Pros of Working in Retirement

You Can Wait to Dip into Savings

Putting off retirement or choosing to work part-time is a common strategy for those who want to put off dipping into their savings. Maintaining a job grants you a steady stream of income to use without cracking your nest egg. This also gives your savings more time to grow. 

You Won’t Get Bored in Retirement

Retirement isn’t easy for everyone. For some, it is hard to transition from the hustle and bustle of a busy career to the freedom of retirement. If you need routine and a sense of purpose to be happy, working in retirement can be a good source of responsibility. Additionally, this can provide regular social interactions to help assuage isolation in retirement. 

You Could Get a Delayed Social Security Credit

To receive the standard Social Security benefit amount, you must wait until you hit your Full Retirement Age (FRA). Should you choose to take your benefits before your FRA, you will be subject to early withdrawal penalties that reduce your benefit by the following, according to Social Security Online

  • 5/9 of 1% for each of the first 36 months before the normal age of retirement
  • 5/12 of 1% for each subsequent month before the normal age of retirement 

This amounts to a reduction of 6.7% for each of the first 3 years. Additionally, there will be a reduction of 5% for each following year before your FRA. So, for example, if you choose to accept your benefits at 62 when your FRA is 67, you will receive a 30% reduction in overall benefits.

Working during retirement until you reach age 67 can help you avoid these problems. 

Cons of Working in Retirement

It’s Not a Fail-Proof Method for Saving

If you choose to work in retirement, it can be a great way to avoid using your savings, but you might not always have control over your employment situation. From your company letting you go to an unexpected illness, you may find yourself in a position where you have to leave the workforce for good. And this can happen whether or not you can afford it. So, make sure you have a savings backup plan. The best way to do this is to prioritize retirement savings when you are young.

It Takes Up Your Free-Time

Though this is great if you want to keep busy, the downside to continuing to work in retirement is that it might not leave much time for doing what you want. This is possibly the most common trade-off in retirement. Naturally, one of the reasons people retire is to give themselves more time to do what they want.

You Could End Up Paying Taxes

If you work and claim Social Security benefits at the same time, you could end up owing taxes on your benefits. If your combined income, or your adjusted gross income (AGI), is over $25k for a single person or $32k for a married couple, you could end up paying taxes. 

Don’t let the future catch you off guard and start planning today with this FREE eBook, Plan the Future for You and Your Spouse’s Long-Term Care.

Confident Living is a continuing care at home membership program, focused on helping you remain active and independent as you age in your own home. We serve the greater Cincinnati area. For more information, contact us online or call (513) 719-3522. 

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