Most of us think of retirement as the end of work, but for some, it just means a drop in hours or a move into a new field. It may not be the retirement you’ve always envisioned, but it does have some definite payoffs, especially if you’ve struggled to save during your career. Here’s a look at some of the pros and cons of continuing to work throughout retirement.
Pros of working in retirement
If you choose to take a retirement job, here are some benefits you can look forward to.
1. A stable source of income
Work provides you with a predictable source of income, and this is invaluable during retirement. With the money coming in, you won’t have to withdraw as many retirement accounts each month. You can allow your investments to continue to grow until they become more valuable in the long run. And if you don’t need the money, you can pass it on to your heirs instead.
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2. An opportunity to save more for retirement
If you work, you can continue to save money in a retirement account. If you choose a tax-deferred account, such as A Traditional IRA or a 401(k), your contributions reduce your taxable income for the year. Or you can go with a Roth IRA. You don’t get tax free up front with these accounts, but you do get tax free withdrawals later.
3. Sense of purpose
Not everyone wants to spend retirement at home, swinging on a porch swing. Some people enjoy the sense of purpose and order that a job brings into their lives. For these individuals, a job may be seen as an essential component of a happy retirement.
Disadvantages of working in retirement
Consider these drawbacks before you decide if a retirement job is right for you:
1. Less free time
Working at a job can take time away from your family members, friends, or hobbies. This may be a huge disadvantage for some, but you may be able to find a position that gives you the best of both worlds. You can look for a job that offers flexible working hours or maybe include some of your hobbies so that you don’t have to choose between work and pleasure.
2. Smallest Social Security Checks
Those who claim social security while working under full retirement age (FRA) – 66 to 67, depending on your year of birth – you may see smaller Social Security checks in the short term. If you were to be subject to your FRA throughout 2022, you would lose $1 from your Social Security check for every $2 you earn over $1,560. If you reach your FRA this year, you will lose $1 for every $3 you earn over $51,960 if you reach that amount before your birthday.
The good news is that the money is not gone forever. Once you reach your FRA, the Social Security Administration recalculates your benefits to account for the money you previously withheld. This means that you will get more out of the program from now on, but the checks will likely still be smaller than what you would have had if deferred interest until you retire.
It doesn’t have to be all or nothing
Working in retirement doesn’t mean you have to stick to a regular nine-to-five job. You can switch to freelance work or part-time work, depending on what industry you’re in. Or you can try to set up your own business instead of working for someone else.
If you decide to continue with a traditional job, you don’t have to do so for the entirety of your retirement. You can work long enough to help provide for what you need and then move into a jobless retirement later. It is up to you. Think about what makes the most sense for you right now — and don’t be afraid to change your mind as you near retirement.
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