As we travel deeper into another year, you may be excited that you’re a year closer to retirement. You’ve targeted a walk-off-into-the-sunset date, and like most people, you can’t wait.
But perhaps you should. More people are putting off retirement until their late 60s or sometime in their 70s, the Boston Globe reported.
One in five Americans 65 or over is still working – the highest percentage since the late 1960s, the Associated Press reported.
Why? To increase savings and invest longer; to ultimately receive bigger Social Security checks; or perhaps mainly to stay busy and more engaged intellectually and socially.
But for many, the financial factors make it a fairly easy decision to stay employed as long as possible.Retirement is still something most people look forward to, but over the years, some of the reasons for anticipation have dwindled.During the Industrial Age, for example, more people worked jobs that require manual labor and were hard on the body. By mid-20th century, many rank-and-file workers had the comfort of a pension waiting for them upon retirement. They simply had to accumulate enough credits to retire while knowing that a pension would provide income for the rest of their lives.
But now, pensions are far less common, giving way to employee-contribution retirement vehicles like 401(k)s. Also, physically demanding jobs are more of a rarity for pre-retirees, and modern-day ergonomic training is available to help ease the aches and pains of the daily grind.Workers today understand they may have to provide for a substantially greater share of their retirement income thanks to longer average lifespans.
This makes retirement planning far different than, say, planning for your child’s college. When saving for their education, parents have the advantage of knowing when the student will enroll in college and generally how long he or she will be there. The “when” and “how long” are unknown factors when it comes to retirement.
These are the types of variables that are difficult to gauge and the bottom-line reasons many are moving back their retirement age. Take savings: Retirement requires much more of that than it did 50 years ago. A survey showed the two top reasons people keep working into their late 60s or 70s is to grow their nest egg and earn more money for fun purposes in retirement, US News reported.
Having enough for basic living expenses, medical, etc., is a concern that’s often not alleviated by Social Security. And it’s punitive to receive the benefits at the earliest allowed time – age 62, or before full retirement age. Taking Social Security early could mean as much as 30 percent less in monthly benefits compared to waiting until full retirement age. That threshold for many now is age 66 to 67, and many financial professionals recommend waiting until 70 when the benefits are at their maximum.
Another key factor to remember about Social Security and how it relates to continuing full-time employment: there’s no penalty for working while taking benefits after your full retirement age. But there is a penalty if you take Social Security early and still work.During 2018, if you worked while drawing Social Security before your retirement age, you were penalized if you earned more than $17,040 from your job. For every $2 earned over that amount, you had to repay $1 to Social Security, Money Talks News reported.Also, for many the new tax laws ensure lower taxes on annual income and make working into the senior years even more desirable. And not to be discounted are the company benefits one can keep enjoying while extending their work life. Many seniors continue to work because their employer’s health insurance is better and less expensive than Medicare.
Although we are beginning to experience a rise in interest rates, we are still at historic lows, which also makes it more difficult for retirees or those looking at retirement to generate guaranteed sources of income – further delaying retirement in some cases.
One must also look at where we are in the current economic/market cycle. Being that we may be in the later innings of this cycle, those planning retirement must evaluate and plan for the potential to retire and begin living off of their retirement savings while experiencing a recessionary economic and bear market cycle early on in retirement.
There are more reasons than ever to keep working longer than people once did, and with smart planning from a Certified Financial Planner™, it can benefit you in the long run, making you more secure and ready to enjoy retirement.
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