According to a recent press release published by the FederalReserve.gov, a lot of households are still not prepared for retirement. 1 out of 3 Americans are not prepared for it. 19% are even between the ages of 55 to 64 – the age before retirement. It is even more scary to note that almost 50% of adults are not even thinking about planning for retirement – or at least have thought very little of it. Of those who have thought about planning, a lot of them are not sure where they will get the finances to support their retirement needs. 24% said that they plan to keep on working as long as possible.
4 reasons why people opt to retire working
There are 4 specific reasons why some people plan to work in retirement.
They still have debts.
After the Great Recession, a lot of people have started to accumulate debt. When they lost their jobs or had to deal with a lower income, they were unable to support the usual expenses of their lifestyle – that included the usual payments they made on their debts. After all, they had to prioritize their basic needs. That led to a higher debt amount for pre-retirees. A lot of them were not able to deal with debt problems and retire comfortably. That is why they had to work in retirement.
They are helping their children or grandchildren.
In connection with the above reason, some pre-retirees, and even retired individuals decided to help out their struggling children and grandchildren. They tapped into their retirement funds to lend a helping hand. This may have given their children hope but it did nothing to help their future selves.
Their retirement fund is not enough.
Since a lot of people dealt with a lower income, they had to sacrifice some expenses from their budget. Apart from debt payments, the other sacrifice that most people made was on their savings. More accurately, they sacrificed their retirement contributions. By the time they needed to retire, they had insufficient funds. Or, it could also be that they started out with enough funds but due to unforeseen circumstances (someone getting ill, mismanagement of funds), they are running out of money. With the life expectancy today, it is not impossible to reach a point wherein your money will expire before you do.
They just want to.
Surprisingly, some people choose to work in retirement just because they want to. According to the article published on CNBC.com, Millionaires are more than likely to continue working while in retirement. A survey done by Merrill Lynch and Age Wave revealed that ⅓ of those with assets between $1 million to $5 million are still working past their retirement age. In comparison, only 15% of those who have $250,000 in assets are working. The main reason why the rich works because they enjoy it. Not only that, they said that it keeps them youthful and their minds remain sharp.
What to expect when you go back to work while retired
For whatever reason that you want to work in retirement, there are a couple of things that you need to remember.
- Income tax. The rule is, if you earn more, you get to pay more income tax. Those who merely rely on their 401(k) or IRA are usually in the lower, if not lowest, income-tax bracket. That means you will be paying less tax. If you add a salary to your retirement fund, that would put you higher in the tax bracket. Not only that, if your work classifies you as a self-employed individual, you might find that filing your taxes will be different. You need to make sure you learn this because tax evasion cases will target any age.
- Social Security Benefits. There are so many factors to consider about your Social Security Benefits when you are working in retirement. When you are not yet getting your retirement benefits, your work will not affect your benefits. Some people delay getting this so they can get a higher monthly benefit. When you have not yet reached the normal retirement age (66 years old) and you are already getting your benefits, then an increase in income will cost you. According to SSA.gov every $2 that you earn that is above the annual limit of $15,480 in 2014 will cost you to receive $1 less from your benefits. In the year that you will reach your retirement age, $1 will be deducted for every $3 that will go beyond the annual income limit of $41,400. As soon as your birthday month arrives, the full benefit will be given to you, regardless of how much you are earning.
- Medicare Benefits. Those who are covered by Medicare and decided to go back to work as an employee, you might want to check out any health care plans that is offered by your employer. Some employer offer insurance coverages that might affect your current Medicare benefits. When you are 65 years or older, any group health insurance (either yours or through your spouse) will pay your medical expenses first before the Medicare benefits will take effect.
You may also want to look into any changes in your household budget – in case you used to retire full time and now you are going back to work. You might have forgotten how costly it can be to work again. You need to buy your work clothes, commute to work, eat and drink while you are there etc. Not to mention the fact that you might have to pay someone to take care of certain household chores or maintenance tasks that you can no longer do because you are busy with work. Consider these additional expenses that you may be faced with.
How to search for work options while retired
After considering all of these factors when you work in retirement, it helps to find the right kind of career that you will enter into. You want to avoid stress at work because, let’s face it, you are not as robust as you once were.
Given that, here are things that you may want to look into when choosing your retirement career.
- Be an educator. The perks of being one of the elderly is that you are perceived to be very wise and patient. These are characteristics that will make you a great teacher. You are not as burdened as the young ones because you have lived a full life and you are not out to prove anything. That makes you more relaxed and patient as a teacher. Try to be a tutor. There are also websites that hire people who can teach the English language to foreigners. This might be something you will be interested in.
- Use your experience and expertise. Sometimes, your experience in the field makes you qualified to spearhead or become a consultant in a company. Make sure that you are updated of the current changes in the industry though. But nevertheless, a lot of companies are looking for people who can lead a team or point the younger generation of employees towards the right direction.
- Capitalize on a hobby. If there is something that you are good at doing, you might want to capitalize on that. Some people look down on making a career out of their hobbies but when you are retired, you want to spend the time you have left to do the things that you love. If that is the case, why not hit two birds with one stone? Do what you love and earn from it.
- Venture into something new. If you can risk it, why not venture into something new? Put up a business and be the boss of your own company. Look for great passive income business options. That way you only have to work on something once (or a couple of times) and it will continue to earn you good money.
Although there are cases wherein work in retirement cannot be avoided, it does not mean it has to plunge you into a life of stress like it did before. Try to enjoy your retirement despite the workload and remember to always take care of yourself. Your main priority right now is to take care of your body. What good will it do for you to earn extra income when it will all go to your health expenses?