The typical retirement plan devised by a financial adviser will call for you to manage your investments in stocks, bonds and cash so that they last through your projected life span.
I agree that you need to create a plan to manage your investment assets, but I also remind people entering the retirement zone to consider their other assets and resources: Your house, income annuities … and your ability to continue to work.
At age 65, you have worked 40 years or so and have amassed savings that you will use to finance your retirement. For many people, that amount of retirement savings plus Social Security might enable you to replace, say, 60% of your current income, forcing you to consider downsizing your home or lifestyle.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
What if you could find satisfying work, either full time or part time, for the next five years? You might be able to retire on 80% to 90% of your final pay instead. In addition, you may be able to explore a field you were always interested in, meet new associates at work, or just keep your mind active.
The benefits, both financially and emotionally, of those last handful of working years is tremendous.
The financial benefits of work
- Continuing to receive compensation, salary or consulting fees will help you postpone the start of Social Security payments, perhaps to age 70. That’s the longest you are allowed to wait to earn the most possible in delayed retirement credits. The government adds an 8% bonus to your annual payments for each year you delay beyond your full retirement age. It could add up to 32% more Social Security income.
- By generating cash flow from your work, you can delay the drawdown of retirement savings or receipt of income from an annuity. That could mean another 25% to 30% of income from this source.
- During these extra earning years, you can contribute to your 401(k) or other retirement savings vehicles. Using the tax law’s catch-up provision can be particularly helpful. Adding that to your existing retirement savings will provide a real boost to your income.
The combination of all of those factors translates into healthier retirement savings and larger monthly payments in retirement.
Filling an income gap from other resources
What if you can only find part-time work, or your full-time work pays you less than your previous employment and you need to stretch your income just a bit further until you start taking Social Security benefits? This is a time when smart retirement income planning is critical.
Your house can provide monthly checks to make up a short-term shortfall, through a reverse mortgage or a home equity line of credit. Consider getting approval for one of those at around the time you retire from your longtime job. Even if you decide not to activate payments, the availability of house-based income will provide peace of mind.
You have many options to turn your savings into income annuities, as well, which will provide lifetime guaranteed income. You would need to annuitize only a portion of your savings to fill the gap of post-retirement work wages.
Who will hire me?
I wouldn’t worry too much about whether you will be employable. With the increase in Boomer retirements, I believe there will be a shortage of qualified knowledge workers across the business spectrum. You can decide whether to work full- or part-time, and whether to stay in your field or branch out to something new. Maybe you will have more opportunity to work from home, take vacation time when you want it, or not get as upset as you used to when the boss starts to rant.
Brian Drum, president of Drum Associates, a leading executive recruiting firm in New York, told me that as more companies accept the “mobile workplace” and a shorter workweek, there will be increasing demand for knowledge workers to fill the void. In addition, with low unemployment rates in general, finding full-time replacements will be difficult. This offers a unique opportunity for retirees to start their second career without having the demands full-time hours and commuting.
“A first step in this process for new retirees is to get their skills organized and inventoried and to update their résumés,” Brian told me. “Most retirees have a wealth of untapped know-how.”
Take your time
One of the best things about working past traditional retirement age is time: If you feel you haven’t saved enough, you have time to make it up. If you haven’t worked out all the details of your retirement income, you have time to do so. You don’t have to rush into decisions because you have stopped working and your income is about to fall off a cliff. Instead, you can give yourself the opportunity to create a more secure financial future for yourself and your family.
-
Taylor Swift Can Shake Off Wedding Costs — But Most Couples Can't: The Price of Getting Married in 2025From engagement rings to bachelor parties, here's what it really costs to get married in 2025.
-
S&P 500 Tops 6,500 Even as Nvidia Slips: Stock Market TodayThe world's most valuable company closed lower after earnings, but the S&P 500 managed to notch a new record high.
-
I'm an Annuities Expert: Here Are Two Ways to Use Annuities to Benefit From the OBBBTo qualify for a new tax break included in the One Big Beautiful Bill Act, some older adults need to lower their taxable income. Annuities can make that happen.
-
Here's Why Munis Aren't Just for Wealthy Investors NowBuyers of all levels should be intrigued by municipal bonds' steep yield curve, strong credit fundamentals and yield levels offering an income buffer.
-
I'm a Financial Planning Pro: Do Your Family a Final Favor and Write Them a Love LetterSpecify your preferences in this personal document that shares your wishes on how you want to be remembered and celebrated. Your family will thank you for easing an emotional time.
-
The Future of Financial Advice Is Human: Gen Z Trusts Advisers, But AI Skills MatterGraduates entering the workforce trust human advisers more than AI tools with their financial planning. But AI can still enhance the client/adviser relationship.
-
I'm a Wealth Adviser: If You're a DIY Investor, Don't Make These Five MistakesEven though you may feel confident because of easy access to investing information, you may be making mistakes that could compromise your long-term performance. Here's what you should know.
-
Building a Business That Lasts: The Critical Steps to Avoid Blunders'Another Way' author David Whorton offers advice on how to build an 'evergreen' business that endures by avoiding common pitfalls that can lead to failure.
-
I'm a Financial Pro: Why You Shouldn't Put All Your Eggs in the Company Stock BasketLimit exposure to your employer's stock, sell it periodically and maintain portfolio diversification to protect your wealth from unexpected events.
-
How Will the One Big Beautiful Bill Shape Your Legacy?The One Big Beautiful Bill Act removes uncertainty over tax brackets and estate tax. Families should take time to review estate plans to take full advantage.
