The working population among people 65 and older is the highest it’s been in 55 years. According to the Bureau of Labor Statistics, 36 percent of 65-to-69-year-olds will be part of the labor force by 2024. Are Americans working past retirement age? Clearly, yes.
People are healthier than in past generations. They live longer. If you are healthy and enjoy your job, you may want to continue working as long as possible. You may want to remain physically and mentally active. You might simply need the money. Healthy or not, healthcare costs are rising along with other retirement expenses.
Full Time Replaced by Part Time
Many retirees see no need to work nine to five. About 70 percent of people 65 and over live in homes that are paid for. With children grown and living on their own, major financial obligations reduced and no mortgage to pay, part-time work suits just fine.
Advantages of Working in Retirement
Working in retirement has its perks. Some are obvious, and some are not.
- No Social Security Penalty – Once you reach full retirement age (66 or 67, depending on when you were born), you can earn as much as you want and face no penalty from Social Security. Furthermore, any penalty from earning too much before full retirement will be returned.
- Increased Social Security Benefits – Social Security will continue monitoring earnings in retirement and recalculate your benefit when appropriate. This amounts to a raise and lasts for your lifetime.
- Delay Signing Up for Social Security – Working in retirement could enable you to delay signing up for Social Security. Every year you delay between full retirement age and 70 your benefit will increase about 8 percent.
- Better Health – People who work longer are healthier. One study found that if you work in retirement, you are more likely to report that your health is good, very good or excellent.
- Longevity – Unsurprisingly, healthy people live longer. Another study at Oregon State University found that those who worked after retirement had an 11 percent lower chance of dying from all causes.
- Mental Health – Working improves your mental health by letting you maintain social connections, stay current with technology, be up to date on news events and remain physically active.
- Identity – Many people would rather say, “I work at Mitchell’s Hardware store” than “I’m retired.” Working instills a sense of belonging to something larger while maintaining your identity.
- Delay IRA Withdrawal – The longer you can wait before withdrawing IRA or 401(k) funds, the longer that money will last. Even part-time work will make your need to draw on funds smaller than it would be otherwise.
- Delay 401(k) Withdrawal – Even when you’re past 70½ and have to take required minimum distributions from Traditional IRAs and most 401(k)s, you don’t have to take them from the 401(k) of your current employer. This lets you keep building wealth longer.
- Employer Benefits – Access to employer-provided health insurance, 401(k) or group life insurance are only a few benefits you could receive while working. Benefits such as these let you save more money for later.
Working after the age of 65 also has a downside. It’s important to weigh the disadvantages when thinking about remaining employed.
- Medicare – You may not need to sign up for Medicare Part B if you are covered by a group health plan at work and your company has 20 or more employees. Otherwise, you must sign up during the seven-month period that begins three months before the month you turn 65. Once you lose coverage you have eight months to sign up. For more on this, go here.
- Social Security Penalty – If you receive Social Security benefits before full retirement age and earn too much (more than $16,920 in 2017, $17,040 in 2018), Social Security will withhold $1 in benefits for every $2 over that amount. You will eventually get the money back once you reach full retirement age.
- Employer Reluctance – The fact that you want to work after the age of 65 does not mean you will be hired. While it’s illegal for an employer to discriminate based on age, that doesn’t guarantee you a job. You may find yourself working as an independent contractor or in a temporary job.
- Gambling with Your Freedom – Early retirement is likely to be your healthiest time for intensive travel involving trips over “uneven ground” (you will learn to search out that phrase in brochures when you’re older), polishing your sports expertise or your gardening prowess, or making frequent visits to far-flung friends. If you’re working through that period, you’ll miss the chance to take advantage of extended adventures. Frailty can show up suddenly. If you do work, try to find a job that comes with generous vacation time.
Start planning early, as much as three to five years before you turn 65 or retire. Get the education or training you need to switch careers, if appropriate. Start networking in your new area of interest. If you will be self-employed, study up on taxes, apply for financing and, if necessary, create a business plan.
Take a Break
Before going back to work, it might make sense to recharge your batteries. You may have unfinished projects at home, travel plans or just need a timeout. Don’t wait too long, though. Some employers are reluctant to hire anyone who has been out of the workforce for a lengthy period and therefore seems rusty or in need of costly retraining. This very likely goes double if you’re older.