By continuing to work after retirement, baby boomers are poised to single-handedly change the way we look at our golden years.
The Rolling Stones.
Their band name alone can conjure up images of rock and roll glory, greatness, and success. But, to mention the "Stones" without mentioning several attempts at retirement would be foolish. They've had almost as many last-hurrahs as Cher and are still rocking to this day. They've even made it clear that this year's tour is by no means their last.
The average age of a member of The Rolling Stones is 60 1/2 years and they're showing no signs of slowing down anytime soon. The same can be said for the rest of the Baby Boomer generation. A generation that changed America is now changing the way we look at retirement. Gone are the days of taking early-retirement and then simply passing time. Baby boomers are expected to retire and then take up new careers in fields they've always wanted to explore, but were never able to. Retirement may be something they do two or three times as they try new jobs and adventures. With medical advances and an increase in life expectancy, most Boomers will live longer than their parents did, and that means a need for more income.
Boomers have made it clear that they aren't slowing down and just like their counterparts in the band; they want time to travel around the country and see new sights. Aside from having more personal time, boomers are also expected to take up new jobs and business endeavors. That means working later in life. But what effect does that have on things like Social Security benefits? And what are some of the other pros and cons to working longer in life? We're about to find out.
Many boomers who have begun to retire and take up new careers are finding one major plus to working: health insurance. One of the added bonuses to staying active and healthy includes the possibility of an extension of health benefits. While not all employers will offer them to part-time employees, some will and it will mean another way to make sure you're saving money even during retirement. Some employers may also offer a 401(k) to part-time employees which allows them to save even more as they work.
The need for money isn't the only drive for extended employment, however. A lot of people just want to get out and stay active and alert. Mentally and physically, the benefits of working part-time during retirement are very attractive. The overall sense of community and personal interaction is a far cry from retirements of the past where retirees were often isolated from much contact.
Of course, there are always a few drawbacks to everything. If you decide you want to work more than just part-time after you've officially retired, you may want to wait to start receiving Social Security benefits until you reach the full-retirement age. According to the Social Security Administration, in 2005, the full retirement age is 65 and 6 months. The age will increase gradually each year until it reaches age 67 for people born in 1960 or later.
By waiting until you turn 65 1/2, you can draw full benefits and still work as much or as little as you want with no effect on your monthly Social Security check. If you decide to start taking Social Security benefits early, at age 62 for instance, there are limits to how much you can earn each year. If you go over these limits, your Social Security benefits will be reduced even more. When making a major decision, such as deciding the age you'd like to retire, it's always important to involve a trusted financial professional for advice. A professional can not only give you more options and plans, but added tips that you might not have known regarding various aspects of Social Security.
Something else to consider when deciding to work longer are the tax consequences. In addition to earning income on top of your Social Security benefits, you may also be withdrawing from your IRA especially if you're over 70 1/2, (the age you're forced to make the minimum withdrawal). All of that income adds up and means more money paid to Uncle Sam. If you plan to receive pension payments from a former employer, you will want to check with a financial professional to see if you will face any additional penalties for working during retirement.
All in all, some would argue that the benefits of working past retirement age are significant. Even when factoring in the drawbacks, most retirees would choose the extra activity and mental stimulation even if it meant a slight reduction in benefits or more money paid in taxes. The bottom line is that the next generation of retirees, the baby boomers, will not go quietly into the night. It's a generation that has brought us more women graduating from college and challenging the standards of workplace equality. It's an age group that lived through the Vietnam War and Watergate. They've brought us Microsoft, the personal computer, and Starbucks to mention only a few of their many contributions. It's a generation that will not be told what to do, and in the end, only the Baby Boomers will decide which farewell tour will be their last.
Lawrence D. Sprung, CFP of Mitlin Financial Inc., is a Registered Representative with Securities America, Inc., a Registered Broker/Dealer, member NASD/SIPC. Advisory services offered through Securities America Advisors, Inc., A SEC Registered Investment Advisory firm. He can be reached at 631-465-2017 or by e-mail at lsprung@mitlinfinancial.com. Feel free to forward any questions, or future topics you would like to see discussed to info@mitlinfinancial.com and put longisland.com in the subject line.