Given retirement can last several decades, many retirees continue working to some degree. Whether by choice or necessity, working after retirement provides you with financial benefits. If you don’t have a financial advisor, this may be a good time to seriously consider getting one. Here are a few considerations to discuss with your financial advisor.
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- Covering essential expenses. Continuing to work can help you pay for essential expenses such as housing, food, utilities, and health care without using retirement savings. This could enable you to invest some of your savings more aggressively and could allow more “lifestyle” spending.
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- Growing your savings. If your employer offers a 401(k) plan and you’re eligible to participate, you can contribute up to $19,500 plus an additional $6,500 in catch-up contributions (for those age 50 and older) for 2020. If you own a deferred annuity, you can continue saving after you reach 401(k) or IRA annual contribution limits.
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- Maximizing your Social Security benefits. Although you can start collecting benefits at age 62, waiting to collect can pay off. With each year you delay, your overall benefit increases until reaching the maximum amount at age 70. Your advisor can help you time your Social Security benefits as part of an overall cash-flow strategy.
Social Security benefits are based on your highest 35 years of earnings. Since non-work years don’t factor into the benefit calculation, working longer could increase your Social Security benefit. - Providing flexibility with the amount of savings you use every year. Factors such as market volatility, interest rates, inflation, health care and risk tolerance affect the percentage of savings you can sustainably spend during retirement (i.e., your withdrawal rate). Earning income can offset these factors to help your savings last.
- Maximizing your Social Security benefits. Although you can start collecting benefits at age 62, waiting to collect can pay off. With each year you delay, your overall benefit increases until reaching the maximum amount at age 70. Your advisor can help you time your Social Security benefits as part of an overall cash-flow strategy.
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A solid retirement income strategy builds your retirement “paycheck” from multiple income sources and doesn’t over-rely on any one source. Your financial advisor can help you with this so that you have confidence about your income for the long term.
