How Do You Picture Your Golden Years?

When you picture yourself in your golden years, are you lying on a beach, hitting golf balls, or working behind a desk?

For a lot of soon-to-be retirees, the office will be where they spend most of their golden years. Working in retirement not only gives you the opportunity to earn more money, but you can maintain structure in your days and keep your social connections alive.

But working in retirement is not for everyone. There are several drawbacks to working during your retirement years as well. For instance, some people are surprised when I tell them their retirement income is subject to tax.

If you’ve started Social Security benefits and you pick up part-time work, your earnings may push your income to a level where your Social Security benefits are taxable. And if you’re younger than full retirement age, working may temporarily lower your Social Security benefits.

Today I’m going to outline some of the pros and cons of working in retirement to paint a clear picture in your mind of what’s ahead if you decide to continue working.

Here are some of the pros to staying in the workforce during your retirement years:

Earn More

A lot of people worry they won’t have enough money saved for retirement. Continuing to work is a good way to allow yourself time to continue boosting your retirement savings until you’re comfortable. If your money is invested, you also get the added benefit of being able to wait out a poor performing market or ride out the highs with less risk.

Also, the longer you delay collecting Social Security, the higher your benefits. So your benefits will be higher if you start collecting Social Security at age 70 than if you started collecting at age 65.

Work Keeps You Mentally Fit

There is plenty of research to support that working delays the onset of age-related diseases like dementia and alzheimers.

Work also keeps you feeling younger. A lot of older workers report feeling younger than their actual age due to their sense of purpose and regular daily routine.

Social Connections

If you choose to work in retirement, you likely have more friends. Work provides opportunities for social interaction.

Some people get bored without work to do. They like having a place to go every day, people to meet, and problems to solve.

Bonus Cash

Even if your retirement is fully funded, some retirees will go back to work part-time to make a little bit extra so they can splurge on small luxuries.

Working a retirement job can give you some bonus cash for traveling, meals out with friends, gifts for your grandchildren or to cover the cost of any other planned and unplanned social activities.

Work-life Balance

If you decide to continue working in retirement, your job will likely become more flexible than your typical career job. Several 60-somethings transition to retirement by arranging part-time work, bridge jobs or a phased retirement.

For example, a lawyer might cut back to three days a week for lower pay. A product engineer might give up his management responsibilities to go back to the laboratory part-time, with flexible hours.

Some retirees will even negotiate work from April through December, and then take off somewhere warm for the winter months.

Try Something New

Just because you decide you want to continue working, doesn’t mean you have to stay in the same field or role. Most jobs offer the opportunity to learn new skills and stay up to date with changes in the industry.

If you know you need mental and intellectual stimulation, staying in a job that offers continuing education might be a good idea.

These are just  some of the pros to working in retirement. Here are some of the drawbacks to working in retirement you should know… 

Taxes

As I said earlier, some people are surprised when I tell them their retirement income is subject to income tax. When you start your Social Security benefits, even if only part time, you run the risk of boosting your income to a threshold where your Social Security benefits become taxable.

Self-employed retirees are hit with almost 15 percent payroll tax. And after age 70, your tax bill could go up again when you’re forced to take distributions from an IRA or 401(k) plan.

Wishing You Were Not Working

This ones obvious but it’s the reality for a lot of eligible retirees. Sometimes your financial situation is such that you can’t afford not to keep working.

Therefore you find yourself in situations where all your friends are retired and you can’t participate in all the fun activities they have planned because you have to go to work.

Having a Boss

You’ll get to a point (or maybe you’re already there) where you’re tired of constantly arranging your schedule to have enough time to do the things you actually want to do.

If your work is stressful, unrewarding or physically tiring and you have a bad boss, your stress levels will drop significantly after you stop working.

Lots of retirees find their back aches go away, headaches disappear and they lose excess weight when they stop working. Not to mention, you don’t have to deal with an exhausting commute every day.

Hard to Pursue New Goals

Possibly the most important reason not to keep working is the opportunity to pursue a new life and make it your own. Maybe you want to retire while you’re still healthy enough to travel.

Several retirees develop their creative side by taking up music, painting, woodworking, and pottery. While others just want more time with their grandchildren, which you can’t have if you’re stuck at work.

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

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