3 Big Mistakes to Avoid When Working Past Retirement Age

The meaning of the word “retirement” continues to evolve. What once signified the end of work now actually means continuing to work — often in new and different ways.

Working in retirement opens up big possibilities for your future.

Working in retirement opens up big possibilities for your future.

Among those of us near retirement, a whopping 72% hope to keep working after retirement, according to a recent national study by Merrill Lynch and Age Wave.

Longer lives, elimination of pensions for most workers, economic uncertainty and a re-envisioning of later life are four forces driving us to stay in the workforce.

There are so many different rewards to continuing to work.  However, there are a few pitfalls we all need to be wary of.  Here are 3 important considerations for work and retirement:

1. Make Sure You Have a Strong Retirement Plan

Just because we are working longer does not mean that we don’t need a really strong retirement plan.

While seven in 10 pre-retirees wants to work in retirement, only one-sixth of these workers say they have discussed work after retirement with a financial advisor.

Whether using a financial advisor or an online retirement calculator, we all need a clear picture of our finances — from now and till death do us part.

When we retire and how much income we receive while working after retirement are critical pieces of our retirement income plan — nevermind other financial considerations like insurance.

Seeking the counsel of a financial advisor is important, says certified financial planner Maggie Kirchhoff. Kirchhoff serves as vice president for Denver, Colo.-based Wisdom Wealth Strategies.  “It is incredibly important to have knowledge regarding when you can retire, how much revenue you will have and answers to all of those big-picture questions,” Kirchhoff says. “Financial planning is like putting a puzzle together, and a financial advisor helps to make sure all the pieces fit perfectly.”

Like a good financial advisor, the best retirement calculators also enable us to document our evolving work plans — look for calculators that enable you to enter retirement jobs and set the duration and pay for this work.

2. Your Social Security Start Date is Different from Your Retirement Date

Retirement does not need to mean the start of Social Security.  And the start of Social Security does not mean that we need to stop working.  These are two different and tremendously important financial events that do — sometimes — impact each other.  However, we should consider them individually.

We can receive Social Security retirement or survivors benefits and work at the same time. But, if we’re younger than full retirement age, our benefits could be reduced (depending on earnings).

“I think the biggest piece people tend to miss when they think about working in retirement is how their Social Security benefits might be impacted,” Kirchhoff says.

A few facts:

  • If you were born January 2, 1943, through January 1, 1955, then your full retirement age for retirement insurance benefits is 66.
  • If you work, and are of full retirement age or older, you may keep all of your benefits, no matter how much you earn.
  • If you’re younger than full retirement age, there is a limit to how much you can earn and still receive full Social Security benefits.

“If you’re younger than full retirement age during all of 2015, we must deduct $1 from your benefits for each $2 you earn above $15,720,” explains the Social Security Administration. “If you reach full retirement age during 2015, we must deduct $1 from your benefits for each $3 you earn above $41,880 until the month you reach full retirement age.”

“Working with a financial planner can help you to realize your new career goals without compromising your benefits,” Kirchhoff says.

An online retirement calculator can also help us to know how to achieve optimal Social Security benefits.

3. Prepare for Medical Expenses

“Planning for medical expenses is incredibly important,” Kirchhoff says, noting that leaving one job for another may change your insurance coverage.

Planning for medical expenses is challenging. We simply don’t know when we are going to get sick and how much our ailments will cost.

“For most, the highest expenses will come at the end of life,” HealthView says in 2015 report.

“This occurs for two reasons: obviously, as we age, we are more likely to need care – from doctors and hospitals to assisted living facilities. The second factor is that health care inflation – projected at 6% – will ultimately result in more expensive medical costs down the road.”

The average lifetime retirement health care premium costs for a 65-year-old healthy couple retiring this year and covered by Medicare Parts B, D, and a supplemental insurance policy will be $266,589, data shows.

Making sure we plan ahead and evaluate our options for health care coverage in the context of a new career can help us get ahead of what can be debilitating medical costs down the road.

“If you are going to retire and leave or change jobs, it’s a good idea to review what insurance plan you’re going to get with your financial advisor,” Kirchhoff says. “We see a lot of clients who retire and realize they can’t afford their health insurance.”

If you’re planning to be a part of the working retirement revolution, meeting with a financial planner can go a long way in achieving the work/life balance that is right for you.  Using a good retirement calculator is another way to achieve a strong financial plan.

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