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All Contents © 2016The Kiplinger Washington Editors
Once, retirement meant collecting your last paycheck at 65, saying so long to your co-workers and closing the door for good on your working life.
No more. Over the last 20 years, the number of people who have stayed on the job past 65 has steadily increased, not necessarily because they need the money (although for many, that's true) but also because society has changed. More women are participating in the workforce -- and staying in it longer. Workers have become healthier and more educated, and jobs are less strenuous, which means that more people are willing and able to work longer. Even the definition of retirement has changed. Rather than retire altogether, many older workers are phasing out of one career and into another.
Whatever your own circumstances, working into the second half of your sixties (or beyond) offers the prospect of a happier, more financially secure retirement when you finally do retire. Here are six good reasons for staying on the job at least a few more years.
By Jane Bennett Clark, Senior Editor
, February 2015
The perks you get on top of your paycheck can be worth hundreds or even thousands of dollars. Among them: employer-paid life insurance and the employer contributions to your 401(k). Another biggie is health insurance, which can be cheaper than Medicare and provide more comprehensive coverage. Employer coverage is especially valuable if your spouse is younger than 65 and covered by your plan.
Whether you should maintain your employer health coverage over parts of Medicare depends on the size of your company. Here's how it works: At 65, you qualify for Medicare Part A, which covers inpatient hospital services. Because Part A is free, you have few reasons not to enroll. At that point, you can also enroll in Medicare Part B (for doctor visits), Medicare supplemental coverage and Part D (for prescription drugs). If your company has fewer than 20 employees, you must sign up for Medicare as your primary insurance, even if your employer offers its own coverage. (If you don't sign up for Medicare, you may not be covered at all. Discuss your options with your employer.)
If your company has 20 or more employees, however, employer-based coverage pays first, and you can stay on it if you choose. When you do retire, you can sign up for Part B and the other coverage without penalty or having to wait for open enrollment.
If you're lucky enough to have a pension (and it hasn't been frozen), you may get a bigger payout by working a few more years. Pensions are calculated based on pay and years of service. Some plans base the benefit on your average earnings over the last three or five years of employment, others on your average earnings over all the years in which you've participated in the plan. Assuming your income is still going up, your pension benefit could be richer for every year you work.
Working isn't all about paychecks and benefits. "The relationships, the recognition and the sense of fulfillment that work provides give people purpose and structure," says Dee Cascio, a psychotherapist and retirement coach in Sterling, Va. That can be especially true for men, she says, who often rely on work for their social network. If you haven't a clue how you'll spend your time -- and with whom -- after you leave the workforce, stay on the job until you do.
Retirement planners generally recommend having enough in retirement savings to last 25 years. For instance, if the difference between your projected spending and income (including Social Security and pensions) in retirement is $25,000 a year, you'll need 25 times $25,000, or $625,000. Fall short of the mark and working longer is the best solution. Not only will you have fewer years in which you'll be drawing down savings, but, while you're working, you can keep feeding your retirement accounts. Even if you don't add a penny, the money in the accounts will continue to benefit from tax-deferred growth.
The full retirement age for Social Security, once 65, is now 66 for people born in 1943 to 1954, and it will gradually rise to 67 for people born in 1960 or later. But for every year you delay taking the benefit past full retirement age, you get a bump of 8% in your benefit, until age 70. If you're healthy and anticipate having at least an average life expectancy (82.9 for men who reach 65, 85.5 for women), it makes sense to wait until 70 to collect the bigger benefit, particularly if you have a spouse who will prosper from a boosted survivor benefit. But that means coming up with another way to cover your expenses during the interim. A paycheck keeps the money flowing.
Although husbands and wives are increasingly retiring separately, most still hope to retire within a year or two of each other, says Richard Johnson, director of the program on retirement policy at the Urban Institute. How so? "When you retire, you have more leisure. Most people want to spend that leisure with their partner," Johnson says.
If your spouse is much younger or simply not ready to retire, working several more years yourself is a simple solution to the home-alone syndrome.
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