Working at retirement may sound a bit like an oxymoron, but it’s a reality for many seniors who can not afford to quit the workers altogether, or just do not want to. It is not good or bad by nature. Like everything, it depends on your personal preferences and financial situation.
Here’s a brief overview of some of the key pros and cons of continuing to work during retirement so you can decide if this is a smart move for you.
Three benefits of working in retirement
Here are some of the key reasons why seniors prefer to retire.
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1. You do not save so fast
Delaying retirement or part-time work through retirement is a popular strategy for those who could not save as much as they had hoped during their younger years. The logic is pretty easy to follow: a job gives you a steady stream of income so you don’t have to deduct your personal savings so quickly. Your savings will continue to grow so that they can extend beyond what you would rely on them alone.
2. It can help relieve boredom
Sitting at home during retirement is not for everyone. If you are the kind of person who needs a routine and purposefulness to be happy, retiring can offer it to you. Depending on what you choose to do, it can also provide more social interaction than you would get if you did not work.
3. You may be able to delay the required minimum distributions (RMDs)
Required Minimum Disbursements (RMDs) are mandatory minimum withdrawals that you must make from your retirement accounts, other than Roth IRAs, beginning the year you turn 72. How much you should withdraw depends on your age and balance, but you may not have to withdraw anything from your current retirement pension plan if you go to work beyond 72. In that case, you can withdraw RMDs from the retirement account postpone until the year you quit your job.
You can still withdraw money from your retirement account if you wish, but if you try to reduce your tax bill and invest your savings longer, the ability to delay RMDs is a huge benefit to staying in the workforce.
Three disadvantages of retirement work
Weigh the above benefits against these potential disadvantages before deciding whether to retire.
1. This is not a sure solution to a shortage of savings
Working with a pension is a great way to supplement your personal savings if you can do so, but you do not always have control over your work situation. If you go through your business or if you get injured or sick, you have to end the workforce forever, whether you can afford it or not. Therefore, it is important to prioritize retirement savings while you are young, even if you plan to keep working, so that you have a pillow to fall back on when something goes wrong.
2. It takes time to do what you enjoy
The most obvious compromise to work at retirement is that it leaves you fewer hours a day to do things you enjoy, which is often the most important point to retire. However, it can not be a big deal if you like the work you do.
3. You can finally pay tax benefits on social security
If you work at the same time and claim social security, your tax on your social security benefits may be due if your combined income – your adjusted gross income (AGI), any taxable interest and half of your benefits – is more than $ 25,000 if you is unmarried or $ 32,000 if you are married.
You could possibly circumvent this by postponing Social Security benefits until you decide to stop working for the better. If you defer benefits, your checks will also be at least up to your 70, so you can make more money in the long run if you wait to sign up. But delaying the last 70s only costs you, and it’s not worth doing just to avoid a slightly higher tax bill.
Finding the right balance
Working at retirement does not have to be all or nothing, and you do not have to stay with the company you worked for until your retirement. You can change from employer, to part-time job or even start your own business if it is appealing to you.
Ultimately, you need to decide what type of job, if any, best fits your retirement goals. Weigh the pros and cons discussed above, and do not weigh to reevaluate your decision if your plans change between now and retirement.