I’m a Financial Advisor: 7 Tips for a ‘No Retirement’ Retirement
Written by
Jordan Rosenfeld
Edited by
Chris Cluff
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Many baby boomers are choosing to work longer and retire later, not due to financial concerns so much as it helps them feel engaged and purposeful. This is often referred to as the “no retirement” retirement — as people may work well into their old age.
However, does working longer have different financial considerations than if you stop working at the typical retirement ages of between 65 and 70; and, if you plan to do this, should you change your retirement plan to factor in longer working years?
Certified financial advisor Christopher Stroup, with Abacus Wealth Partners, explains what to do and not do if you plan to keep working into retirement.
Don’t Stop Your Retirement Planning
Despite the fact that you may have more income in the years when most people typically stop producing income, Stroup suggested you shouldn’t change your retirement planning strategy, which assumes you will retire between 65 and 72.
“As you get older, especially as you get to that season of your life,” he said, “things can change really rapidly. You never know if there’s going to be a health event or some kind of emergency that could come in and really limit your ability to continue working when you thought you were always going to just work.”
He said it’s a good idea to keep building wealth and accumulating assets no matter what.
“Even if you decide you want to save less, that means maybe you’re paying more taxes in the present moment because you’re not fully taking advantage of an employer retirement plan,” he said. “And it’s important to understand those trade-offs as well in terms of what that could mean.”
Delay Social Security
One of the benefits of working later, however, Stroup said, is that “it’s a great opportunity for you to defer taking Social Security until the maximum age so that you can receive the maximum benefit when you can no longer defer.”
He said there should be less need to collect Social Security “as long as your work income is meeting your needs or maybe other assets that you’ve accumulated over the prior couple of decades of work.”
Defer Drawdown of Savings
Working later means you can defer drawing on any savings that you may have or drawing more than you would do if you were not working, Stroup said.
“So that helps preserve those assets for later in life or for once you can no longer work or potentially passing it on to any heirs that you may have, if that’s important to you.”
Understand Your Expenses
For those who find they have to keep working part time because they haven’t properly budgeted for all the things they want to do in retirement, Stroup said, “Understand what your expenses are going to be at that point in your life. … Is that part-time work going to be able to fully fund those ongoing expenses, or will you need to start drawing from some of your assets during that time as well?”
It’s important to know whether your work can mitigate some of the distributions that you would have to take otherwise, he said.
Have a Tax Plan
Of course, if you continue to work and take Social Security, also keep in mind that, depending on the income that you earn, more of your benefits may be taxable, Stroup said.
“So something to understand is that once you cross different thresholds in terms of earned income in a year, that means more of that Social Security could be taxable to you than if you weren’t working,” he said. “So there’s nuances like that that you’d want to understand and speak with an advisor or a CPA. They can help you really understand what that breakdown looks like and what that could or could not cost you if you decide to continue to work in terms of making that decision.”
Consider Your Required Minimum Distributions
Stroup said it’s also important to understand that eventually if you’re working much later than is typical, you’re going to be forced to take required minimum distributions from your accounts.
“So what does that look like if you’re continuing to work and being forced to take these distributions that are likely taxable to you? Is that going to bump you up into a higher tax bracket that you don’t want to be in?”
All of these considerations should go into your planning in advance.
Remember Community and Connection
Of course, in addition to the financial benefits of working later, Stroup pointed out that working later in life also brings community, a sense of belonging and other personal benefits that can be good for health and longevity.
“I think it’s really important for people to understand and focus on what are you retiring into,” he said. “We see this trend where people are retiring into sort of a lower version of what they were previously doing because all of those intangibles are just as important to ensure longevity.”
No matter when you plan to retire, Stroup said, planning should take into account unexpected contingencies.
More From GOBankingRates
