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Working Beyond Retirement Age: What It Means for Your Plan

Don’t Quit Your Day Job? Changing Careers in Retirement
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There can be personal and financial benefits to working past traditional retirement age. Carrie Schwab-Pomerantz, CFP®, explains.

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Janet Alvarez:

Longer lifespans, new technologies, new attitudes toward work and economic uncertainty are among the factors leading more older workers’ to continue employment past a traditional retirement age. Carrie Schwab-Pomerantz, CFP®—president of the Charles Schwab Foundation and author of The Charles Schwab Guide to Finances After Fifty—joins us today to discuss how working past retirement can provide significant personal, professional and financial benefits.

Carrie Schwab-Pomerantz:

Working longer can keep us intellectually stimulated and help us maintain our social circles, which is often intertwined with our work.

Janet:

You’re listening to the Insights & Ideas podcast, brought to you by Charles Schwab. I’m your host, Janet Alvarez. If your vision of retirement involves kicking back and enjoying ample free time, you might want to take a look at the many older workers who are enjoying enriching careers well past a traditional retirement age. As Carrie Schwab-Pomerantz tells us, the reasons for staying at work are as rich and diverse as the opportunities and benefits enjoyed by those who continue to work later in life.

Hi, Carrie.

Carrie:

Hi, Janet.

Janet:

So Carrie, today we’re talking about working past traditional retirement age. It’s a trend that’s really gaining in popularity for a number of reasons. From your perspective, what are some of the most prevalent reasons why some people are choosing to work longer?

Carrie:

You know, there are real changing demographics today, and it’s a totally different time than when our parents retired. For instance, today, we’re living longer, we’re generally healthier, and so many of us are looking for new challenges and personal fulfillment.

So working longer can keep us intellectually stimulated and help us maintain our social circles, which is often intertwined with our work. But also, there is the financial benefit. Unfortunately, many people today have not saved enough for their retirement. So by working longer, you earn more, you have more time to save, and less time to spend it.

Janet:

So Carrie, I know that you’ve got some personal anecdotal stories of experiences with workers who have chosen to work beyond a traditional retirement age. Can you tell us a little bit about those experiences?

Carrie:

Yeah. I’m finding more and more of my friends are working later in life. I have one friend named Chris, he turned 70, and he started his first consulting firm. He has so much experience and knowledge and energy, so he’s starting a whole new business. And then another friend of mine, when he was 60, he decided to retire. He was a professor of architecture.

And right afterwards, he thought, “Oh, I’ll just work part-time and teach one course.” Before you knew it, he was asked to be interim dean for the whole architectural school. And, by the way, he’s 70 now, and he’s been interim dean three different times. So, again, he loves to learn and grow and be involved.

Janet:

While many people plan to continue in their current careers later into life, working past retirement often takes another form—the Encore Career. That’s a career in another arena, whether it be a non-profit, the arts, a new industry, or simply a role that allows for the development of new skills. With the benefit of greater self-knowledge and fewer financial obligations, more would-be retirees have chosen to tackle new challenges and pursue new professional horizons.

The most famous example of an encore career may be Anna Mary Robertson Moses, also known as “Grandma” Moses. After running a farm in upstate New York and raising five children, she took up painting in her seventies. At first, she charged just $3 to $5 for a painting. Thirty years later, her canvases fetched as much as $10,000. Just as importantly, the work seems to have kept her young. Life magazine celebrated her 100th birthday by putting her on its cover in September of 1960.

Janet:

So Carrie, working past a traditional retirement age can also impact other income streams, right? Medicare and Social Security benefits, for example, can be impacted. Can you tell us a bit about that?

Carrie:

Both Medicare and Social Security benefits can be complicated, so let me take them separately. First with Social Security. If you continue working and can delay filing for Social Security until age 70, you’ll receive the maximum benefit. So beginning at your full retirement age, which currently is 66, your benefit goes up 8 percent each year you delay, up until age 70, at which time your benefit maxes out.

So the main takeaway is that if you’re healthy and you anticipate a long life, delay filing as long as you can up to age 70. On the flipside, though, if you’re not healthy or your family has a poor track record in terms of longevity, you might consider filing for Social Security a little earlier.

So now let’s move on to Medicare. Once you file for Social Security, you are automatically enrolled in Medicare Part A and B. But if you delay filing for Social Security, you should enroll only in Part A at age 65.

Because there’s no cost for Part A, and so there’s no downside. Another consideration is not to enroll in Medicare Part B if your employer has more than 20 employees and offers health benefits because it’s typically more economical to stick with your employer plan as long as you can. But also, keep in mind that once you’re enrolled in Medicare, you can no longer contribute to a health savings account.

Janet:

So Carrie, are there any other basic or simple adjustments I should consider making to my financial plan now if I anticipate working well into retirement?

Carrie:

You always want to crunch the numbers regularly. How much money do you have, how much money will you need. Creating a budget with your new working income. And again, the longer you work, the longer you can save, which can have a huge impact on your overall retirement savings. But you also want to know what you’re working with.

And also, working past full retirement age also makes it a lot easier to delay filing for Social Security, which as I mentioned, can be anywhere up to 76 percent higher than, say, if you took it out at 62, which is the earliest that one can take out Social Security.

Janet:

Roughly 19 percent of Americans 65 and older were employed in April 2016, according to the U.S. Bureau of Labor Statistics. That number was closer to 10 percent through the late eighties and early nineties. The last time such a large percentage of people over 65 was at work was the early 1960s, before the creation of Medicare. And there’s reason to believe that working in retirement will be part of the planning, and the lives, of even more Americans. A Federal Reserve study found that a full 27 percent of Americans said they will keep working as long as possible, while an additional 12 percent said they have no plans to ever retire.

Janet:

Carrie, perhaps the greatest benefits of working longer aren’t financial but personal. What final words of wisdom would you share with individuals considering working past retirement age?

Carrie:

I think of retirement as a new chapter, not as winding down. You know, as I mentioned about my friends who started their businesses and so forth, there is so much for all of us to offer the world and so many contributions we can continue to make—for others, for ourselves.

And take on new challenges. I know for myself, I don’t see myself retiring any time soon, for sure. I think it’s in my family. My grandfather, he was 97 when he—well, he couldn’t work anymore at 97. So I hope to do the same and have an impact in the world, have new challenges. And, hey, continue to get an income, which makes it all a win-win.

Janet:

It certainly is, Carrie. And thank you so much for joining us today.

Carrie:

Thank you, Janet.

Janet:

Carrie Schwab-Pomerantz, CFP, is president of the Charles Schwab Foundation. You can follow her on Twitter at @CarrieSchwab, that’s C-A-R-R-I-E-S-C-H-W-A-B. Or read her “Ask Carrie” column at Schwab.com/AskCarrie. That’s it for this installment. The Insights & Ideas podcast is brought to you by Charles Schwab. You can find us on iTunes or at insights.schwab.com. If you enjoyed this episode, please subscribe and write a review on iTunes. Thank you for listening.

Important disclosures:

Charles Schwab Foundation is a 501(c)(3) nonprofit, private foundation that is not part of Charles Schwab & Co., Inc., or its parent company, The Charles Schwab Corporation.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market, economic or geopolitical conditions.

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