(KaileyHagen)
Most of us think of retirement as the end of the job, but for some, it just means a reduction in hours or a transition to a new field. That may not be the retirement you always envisioned, but it definitely has some perks, especially if you’ve struggled to save throughout your career. Here’s a look at some of the pros and cons of continuing to work in retirement.
Advantages of working in retirement
If you choose to have a retirement job, here are some of the benefits you can expect.
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1. Constant source of income
Working provides you with a predictable source of income, and that’s invaluable in retirement. With money coming in, you won’t have to withdraw as much from your retirement accounts each month. You can allow your investments to continue to grow so they are worth more in the long run. And if you don’t need the money, you can pass it on to your heirs.
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2. An opportunity to save more for retirement
If you’re working, you can continue to set aside money in a retirement account. If you choose a tax-deferred account, such as a traditional IRA or 401(k), your contributions reduce your taxable income for the year. Or you could opt for a Roth IRA. You don’t get tax-exempt up front with these accounts, but you do get tax-free withdrawals later.
3. Sense of purpose
Not everyone wants to spend their retirement at home, rocking on a porch swing. Some people enjoy the sense of purpose and order that a job brings to their lives. For these people, a job might even be seen as an essential component of a happy retirement.
Disadvantages of working in retirement
Consider these drawbacks before deciding if a retirement job is right for you:
1. Less free time
Having a job could take time away from family, friends, or hobbies. This could be a major drawback for some, but you may be able to find a position that gives you the best of both worlds. You can look for a job that offers flexible hours or maybe incorporates some of your hobbies so you don’t have to choose between work and play.
2. Smaller Social Security checks
Those who claim Social Security while working below their full retirement age (FRA), ages 66 to 67, depending on their year of birth, could see smaller Social Security checks in the short term. If you will be under your FRA for all of 2022, you will lose $1 from your Social Security check for every $2 you earn above $19,560. If you reach your FRA this year, you will lose $1 for every $3 you earn over $51,960 if you reach this amount before your birthday.
The good news is that money is not gone forever. Once you reach your FRA, the Social Security Administration recalculates your benefit to account for the money you previously withheld. That means you’ll get more from the program in the future, but your checks will probably still be smaller than they would have been if you had delayed benefits until you retired.
It doesn’t have to be all or nothing
Working in retirement doesn’t mean you have to commit to a regular 9-5 job. You could switch to freelancing or part-time work, depending on the field you’re in. Or you could try setting up your own business instead of working for someone else.
If you decide to stay with a traditional job, you don’t have to do this throughout your retirement. You could work long enough to help save what you need and then transition into jobless retirement later. Everything depends on you. Think about what makes the most sense to you right now, and don’t be afraid to change your mind as you near retirement.
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