Many Americans are staying in the workforce past their normal retirement age. According to the U.S. Social Security Administration, more than 30 percent of individuals between the ages of 70 and 74 reported income from earnings in 2010 (the latest year data is available). Among those ages 65 to 69, nearly 49 percent reported employment income.
Some remain employed because they want or need a regular paycheck. For others, it may be the desire for stimulation and social contact. Whatever the reason, the decision to continue working into your senior years could potentially have a positive impact on your financial future.
Working longer enables you to add to your retirement nest egg. You can add to a 401(k) plan no matter what your age and you can fund IRAs until reaching age 70½, when withdrawals are required.
Another benefit: If you forego Social Security benefits past your full retirement age (FRA), your benefit will increase by 8 percent per year for each year you wait (until age 70, when the maximum amount is fixed). Your full retirement age is computed based on your date of birth. For those born between Jan. 2, 1943 and Jan. 1, 1955, FRA is 66. For those born after Jan. 2, 1960, FRA is 67. For those born between 1955 and 1960, FRA is on a graduated scale from 66 years and 2 months to 66 years and 10 months. Complete details are at the Social Security website (www.ssa.gov).
Even if you do not have access to a retirement account, continuing to earn income may help you to delay tapping your personal assets for living expenses, which could help your portfolio last longer in the years to come. Whatever your decision, be sure to apply for Medicare at age 65. In certain circumstances, medical insurance might cost more if you delay your application.
Work doesn’t have to be a chore. You may find opportunities to work part time, on a seasonal basis, or to capitalize on a personal interest that you didn’t have time to pursue earlier in life.
-Mike Arnow is an owner/member of Sattell, Johnson, Appel Financial Advisory in Menomonee Falls.
