Working in Retirement: Is it the New Normal?

May 23, 2018

Working in Retirement

For many retirees, the idea of sitting back and propping their feet up for the next 30 years just isn’t realistic. Many have spent their whole lives working and have no intention of slowing down. But for some, though, remaining in the workforce is not just a choice, it’s a requirement.

More than 10,000 baby boomers are turning age 65 every day. According to a 2016 survey by accounting firm Price Waterhouse Coopers, roughly half of them have investments totaling less than $100,000. At a 4% withdrawal rate, that would produce less than $4000 per year in retirement income.

What does this mean for You?

Quite often, our conversations with clients include questions about how to navigate earning a paycheck while beginning their retirement journey.

Here are some tips that address some of the more common concerns.

  • Required Minimum Distributions (RMD) start in the year you turn 70.5, but an exception can be made for your 401k.
    • There is not any relief for IRA’s, but your company 401k could be maintained while you’re still on the payroll.
  • Social Security may be taxed if you have an earned income.
    • Until you reach full retirement age, Social Security will subtract money from your retirement check if you exceed a certain amount of earned income for the year.
  • If you are collecting Social Security retirement benefits before full retirement age, your benefits are reduced by $1 for every $2 you earn over the limit.
  • Private Health Insurance is available but can be very expensive and is a major hurdle if retiring before Medicare eligibility begins at age 65.
    • For some, remaining in the workforce to keep health insurance is their only reasonable option.
  • The 4% withdrawal rule is only a guideline and not a hard and fast rule. The earlier you retire, the longer you’ll stress your retirement accounts with withdrawals.
    • If retiring early, your personal savings will be asked to work that much harder for you.
      • A later retirement date can help push that withdrawal rate safely above 4%.

These are just a few concerns, obviously, every situation may be different. We can help you develop a plan for your retirement income, even if you aren’t retired!

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