Even without a fat nest egg at your disposal, you can still get ready for your Golden Years. How should you approach the question of post-retirement income and employment?
If you don’t plan to work
Setting aside money for retirement is easy when you have a great job. But what if you don’t? If your spouse works while you manage the house, a premature death or divorce could leave you with fewer options. If you’re disabled or just can’t work regularly, surviving on a small pension could present problems.
If you haven’t already, begin making financial plans now, so you’ll have enough income to make your golden years as safe and comfortable as possible.
Start with a reality check. For thirty days, make a list of everything that you’ve spent money on. It will reveal lot about your current lifestyle, according to Bill Demaree, founder of Demaree Retirement Services in Indianapolis, IN. “You have to decide what is a need and what is a want,” he says. “Food is a need but cable TV is a want.”
Learn about Social Security
Are you a widow or widower? You may qualify for a survivors benefit when you reach sixty years of age, according to the Social Security Administration. This even applies if you’re divorced, so long as you were married for at least ten years. In some cases, these age and year limits may be waived if you’re disabled or caring for a child.
However, don’t plan on relying on Social Security for all of your retirement needs, especially if you’re still young. Unless Congress changes the law, it will probably start running out of money in 2031, according to the Congressional Budget Office.
“There is no doubt that if you have paid into Social Security that you will receive Social Security,” says Dolph Janis, founder and owner of Clear Income Strategies Group in Charlotte, NC. “However, for the people that have twenty or thirty years plus until retirement, their payments are highly likely to be reduced.”
Even if your spouse works but you don’t, you can still open an Individual Retirement Account in your name, according to the Internal Revenue Service. Informally called a “Spousal IRA”, it’s just like a regular IRA — you (and your spouse) won’t have to pay taxes on that money until you withdraw it.
When you’re ready to retire, use your savings to purchase an annuity, which can give you an income for life, according to Janis. “You can eliminate a lot of stress about running out of money,” he says. “Strategies will vary for each person but knowing that you can count on income still coming in is pertinent.”
If you live in your own home, look for a trustworthy housemate with whom you can share expenses. “For the disabled, having family and friends is important since money is limited,” says Demaree. He suggests networking in such place as Facebook, your church and, for veterans, the American Legion.
If you need to live in an assisted-living center, state funding may be available to help pay the rent, according to Janis. Find someone to walk you through that process. “Typically this planning is done with the help of a family member or advocate,” he says. “Whether you are in a skilled nursing facility or planning to move to one, it is important to make sure that someone is there for you.”
On the other hand, don’t let sharing a home turn into a greater financial burden for yourself. “I see more and more kids moving back in with mom and dad due to divorce and bringing their young children with them,” says Demaree. “The kids should be helping mom and dad out.”
Yet, many adults can’t afford to take care of their parents, because people live longer and start families later, according to Janis. “Imagine a typical 45 year old couple, taking care of both of their parents and having to raise young children,” he says.
Pick up some extra cash
You don’t have to grill burgers with high school kids at a fast food joint. Find creative ways to earn extra money. “How about pet or house sitting or running errands and going to the store for people who aren’t able,” he says. “Hire yourself out as a handy man if you know how to fixed things.”
Even better, the new economy has created new opportunities for more fulfilling part-time work, such as starting your own online business. “More than ever, seniors are working in fields that they appreciate, whether it be crafting, clothing, customer service” or something different, says Janis. “They are able to supplement their income and still have the passion for day to day activities.”
If you want or need to work
Planning to keep those regular paychecks coming in after you reach retirement age? Suddenly find that you need to reenter the workforce after several years’ absence?
You’re not alone. In 2019, one in five seniors over 65 work either working or looking for works, according to the AARP. So, what might you expect as an employed senior citizen?
While most non-retired workers say they aren’t willing to take a pay cut when working during their retirement years, it is not uncommon that you will end working in a lower-paying job for which you are probably overqualified.
On the other hand, if you manage to pick up some big paychecks, Social Security might increase the size of your benefit, which is based on your earnings history.
For that matter, are you planning to collect benefits early, before reaching full retirement age? If so, the Social Security Administration allows you to earn only so much each year before it starts withholding a portion of your check.
The good news is that the government withholds it only temporarily. Once you reach full retirement age (currently between the ages of 66 and 67), they start paying the full amount of your benefit plus some extra cash to make up for the money that it had withheld earlier.
Having a job can affect your enrollment decisions, according to the AARP. For instance, if your employer offers an attractive insurance — unlikely as that might sound — you might not want to sign up for Medicare Part B, which has a monthly premium.
Your best bet is to call the Social Security Administration, which manages Medicare enrollment. Discuss your employment situation with them and see what options are available. If you can’t reach them — or even if you do and don’t like what you hear — consult with a knowledgeable financial advisor who specializes in retirement options.
Love your lifestyle
Looking for something to do besides pulling weeds in the garden? Even if the paychecks are smaller, many employed retirees aren’t primarily in it for the money. Instead, they’re motivated by a need to find a purpose in life, to stay physically or mentally active, or other reasons besides the extra income.
It’s hard to say whether or not punching a clock during your golden years will be good or bad for your heart and mind. Various research studies into the health effects of employment on senior citizens have produced mixed results. For instance, older workers don’t have as many injuries as younger workers, but when it occurs the consequences tend to be more severe.
One interesting study in the Journal of Occupational Health Psychology indicates that “bridge” employment — transitioning into part-time or temporary work before eventually leaving the work force permanently — “either in a career field or in a different field was associated with fewer major diseases and functional limitations, whereas engaging in career bridge employment was associated with better mental health.”
Keep it Flexible
One popular strategy for staying healthy and maintaining a fulfilling lifestyle involves aiming for a job with a flexible schedule. There may be periods when your body’s ability to perform tasks isn’t up to par or you have to schedule time for medical care.
Most workers in their sixties expect to transition into retirement via their current employer, according to the Transamerica Center for Retirement Studies. Before you retire, discuss your plans with you employer and ask about the availability of part-time, flex-time, seasonal or phase-retirement options.
But be prepared for rejection and, if necessary, look elsewhere for opportunities. “While most expect that their transition to retirement will happen at their current employer, few say that their employers have formal business practices in place that could accommodate them,” said Center president Catherine Collinson in a public statement.”
“By extending our working lives and fully retiring at an older age, we can earn income, bridge savings shortfalls and stay active and involved,” she continued. “It’s also important to remember that life’s unforeseen circumstances, such as health issues or job loss, can derail the best laid plans. Everyone needs a Plan B for the unexpected.”