Are you thinking of not retiring? You are not alone

VaselineAugust 15, 2024

0 5 minutes read

Are you thinking of not retiring? You are not alone

Are you thinking about not retiring? You are not the only one. Putting on a watch is still part of the regular routine for many older adults. In fact, Americans over 75 are the fastest-growing age group in the labor force, quadrupling since 1964, according to the Pew Research Center. Some experts now estimate that this population will double in the next decade. So much for sunbathing.

The share of previously retired baby boomers returning to the workforce hit a five-year high of 13.2 percent last year, LinkedIn data shows. That’s a 23.9% increase from 2022. Why? Longevity and inflation were cited as major factors.

“Depending on when you plan to retire, you may have another 30, 40, 50 or more years to live — and that’s a long time to be walking aimlessly,” LinkedIn quoted a recent non-retiree as saying.

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What are the motivating factors?

First, people are living longer. According to a United Nations estimate, the world had only 27,000 centenarians in 1970. Now, the total number of centenarians worldwide exceeds 500,000 and could reach 3.5 million in 2050.

Second, social security benefits. Although you can start taking Social Security as soon as age 62 and may be eligible for Medicare at age 65, this is not your full retirement age (FRA) for Social Security purposes. FRA, the age you have to reach to receive 100% of your monthly benefit, starts at around age 66 or 67, depending on your year of birth. However, for each month you claim benefits before reaching FRA, your benefits are permanently reduced.

On the other hand, if you delay retirement past full retirement age, your Social Security payment will increase by one percent each month, up to 8 percent per year. That is, until you turn 70. At that point, you will no longer be eligible for any additional increases.

Third, the money. Unfortunately, the LinkedIn story also reveals that most people haven’t saved enough to retire comfortably. According to a recent AARP survey, earning extra money was the most common factor driving some Americans to return to the workforce,

Fourth, making connections. Financial planner Judith Ward said many retirees are considering re-entering the workforce because it is “a powerful way to make social connections and restore a sense of purpose”. George Jerjian echoed the sentiment. “Sure, money is a concern, but the biggest retirement challenge that no one talks about, in my experience, is finding purpose.”

Where do non-pensioners work?

According to LinkedIn data, most of the 60.3 percent of baby boomers who had a job in the past year were employed full-time. The rest (39.7%) were self-employed. Many boomers found jobs in the Sun Belt – a region of sunshine and low taxes that stretches across the southern US from Florida to California.

In addition to location, AARP Vice President Carly Roszkowski says, “Many older Americans are ‘starting their own business driving for Uber or DoorDash — jobs that didn’t exist 15 to 20 years ago.’

Proceeding with caution

Retirees who decide to return to work, however, need to be careful with their Medicare coverage. That’s because both Part B and Part D premiums are based on your income. Your premium costs could increase if you start making more money.

Medicare coverage also comes into play if you return to work for a company that offers a health care plan that qualifies as primary coverage. If so, you can drop your Medicare Part B and re-enroll later without penalty. After you finish working, you have eight months to re-register, or you could face a late registration penalty.

You may also have both Medicare and private health insurance through your new employer—one will be your primary coverage and the other will be secondary. If you have both, you can’t put money into a health savings account (HSA) through your employer without facing a tax penalty.

Another aspect to consider before withdrawing is the possibility of tax changes. The extra cash you earn can push you into a higher tax bracket. This is especially true for anyone with additional income from a pension, retirement account or social security.

According to Kiplinger, there are ways to avoid this. You may consider converting some of your tax-deferred retirement accounts to Roths. You’ll pay taxes up front, but you won’t pay income tax when you withdraw your money because you already paid tax when you contributed it.

You also don’t have to take minimum distributions from these accounts. That means you’re not unnecessarily adding income that could push you into a higher tax bracket. A financial advisor can help you understand the big picture, while also finding ways to reduce your tax burden should you decide to retire.

How to retire

Let’s say you’re one of the five retirees who aren’t retiring and you’re not sure where to start. In this case, Kerry Hannon, author and workplace columnist, recommends focusing on honing and cultivating your network. “Involving the wider job search community – not family or close friends – will help the most.” , she said. “People who participate in the same hobbies that you don’t know as well are the ones who might keep you in mind when they hear about opportunities.”

It’s fine for the younger ones, but getting your foot in the door can be a little more daunting when you’re older. In addition, many older workers fear that age discrimination will hurt their chances of landing a role, said AARP’s Roszkowski. “You want to include credentials, but you don’t need to include graduation dates.”

Does the workforce need older workers?

Baby boomers bring a lifetime of experience and skills that span decades of employment. A recent LinkedIn survey found that boomers are also the generation least likely to feel burned out at work, and separate Bain research shows they feel more loyal to their employers than other generations. Additionally, research presented in the Harvard Business Review shows that teams that span generations can result in stronger overall performance and more productive collaboration.

Recent findings from LinkedIn’s Workforce Confidence Survey also show that more than half of Gen Zers and millennials in the US say they need a mentor at work. Mentoring relationships can help students develop their careers and allow mentors to cultivate a greater sense of purpose and meaning. Win-win for everyone.

Note: A version of this article first appeared in the Kiplinger Retirement Report, our popular monthly magazine covering the key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement tips this is on the money.

VaselineAugust 15, 2024

0 5 minutes read

Vaseline

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