Working past your retirement age

April 18th, 2011 John Evans

The recent economic challenges have many older Americans considering the prospect of staying in the workforce past their normal retirement age. This isn’t a new phenomenon. According to the Social Security Administration, nearly 31 percent of individuals between the ages of 70 and 74 reported income from earnings in 2008, the latest year data is available. Among a younger age group, those between 65 and 69, approximately 48 percent had income from a job.*

Some remain employed for personal reasons, such as a desire for stimulation and social contact; others still want a regular paycheck. Whatever the reason, the decision to continue working into your senior years could potentially have a positive impact on your financial future.

The impact of continued employment

Working later in life may permit you to continue adding to your retirement savings and delay making withdrawals. For example, if you earn enough to forgo Social Security benefits until after your full retirement age, your eventual benefit will increase between 5.5 percent and 8 percent per year for each year that you wait, depending on the year of your birth.

You can determine your full retirement age on the Social Security website or by calling the Social Security Administration at 1-800-772-1213.

Adding to your nest egg

Depending on the circumstances of your career, working could also enable you to continue adding to your retirement nest egg. If you have access to an employer-sponsored retirement plan, you may be able to make contributions and continue building retirement assets.

If not, consider whether you can fund an IRA. Just remember that after age 70 ½ , you will be required to make withdrawals, known as required minimum distributions (RMDs), from traditional 401(k)s and traditional IRAs. RMDs are not required from Roth IRAs and Roth 401(k)s.

Delay tapping into personal savings

Even if you do not have access to a retirement account, continuing to earn income may help you to delay tapping your personal assets for living expenses, which could help your portfolio last longer in the years to come.

Whether you decide to continue working or not, be sure to apply for Medicare at age 65. In certain circumstances, medical insurance might cost more if you delay your application.

Work doesn’t have to be a chore. You may find opportunities to work part time, on a seasonal basis or capitalize on a personal interest that you didn’t have time to pursue earlier in life.

*Source: Income of the Population 55 or Older, 2008, Social Security Administration (most current data available).

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate to you, consult your financial advisor prior to investing.

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John Evans

About the author

John Evans is Investment Services Manager at MidWestOne Bank. He specializes in investments and retirement planning.

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