Can working longer keep you from outliving your income in retirement?
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Can working longer keep you from outliving your income in retirement?


Continuing to work beyond the traditional retirement age has several advantages, including helping to ensure you maximize your Social Security benefits and have enough income to last a lifetime.

Although most people dream about the fun and relaxation that awaits them in retirement, the reality is that, just like during your working years, it is necessary to generate a “paycheck” so you can continue to pay for your housing, food, transportation and other necessities. Ideally, you may also want to bring in a bit more than you actually need so you can afford non-essentials, too, like travel and entertainment.

Yet, with people living longer life spans today, not only do retirees have to bring in a regular income – and make sure that it rises to keep pace with inflation – but that incoming cash flow must also be stretched out for a longer period of time.

Because of that, some people opt to continue working and earning an income – even after they “retire” – so they can concentrate on building up savings, which in turn could allow for a longer-lasting paycheck in in the future.

But, while working longer may help to keep you from outliving your income in retirement, there are also a few caveats to be aware of. That’s because in some cases, you could end up benefitting Uncle Sam more than yourself.

Should you work during retirement?

For many people, saying goodbye to their employer doesn’t necessarily mean that they will stop working altogether. For instance, some opt to work on a part-time basis for the social aspect it can provide.

Others have the goal of continuing to maintain employer-sponsored health insurance coverage and/or putting more into savings so as to increase passive retirement income down the road. This is particularly true for those who may not have an adequate amount of income to cover their living expenses.

If you were born in... Your full Social Security retirement age is…

1943-1954

66

1955

66 + 2 months

  1956
  

  66 + 4 months
  

1957

66 + 6 months

  1958
  

  66 + 8 months
  

1959

66 + 10 months

  1960 or later
  

  67
  
Social Security Full Retirement Age Source: Social Security Administration

A study from the U.S. Congressional Budget Office (CBO) defines the “adequacy of retirement income” in two primary ways. These are:

  • Whether or not it satisfies basic needs.
  • Whether or not it allows retirees to maintain the standard of living they experienced before retirement.

The CBO also states that the impact of working – even for just a few additional years – can be substantial and that doing so could provide the opportunity for:

  • Increased earnings.
  • Increased savings.
  • Increased Social Security benefits.

In fact, by working just five additional years, savings could be increased by more than 50%.

As an example, you could begin your Social Security retirement income benefits as early as age 62. If you do, though, the dollar amount will be permanently reduced. But if you work until your full retirement age (FRA), you can bring in a higher amount of benefit. And, because two of the key components for determining your Social Security benefit amount are your overall earnings and your age, the amount you receive can rise exponentially the longer you work and earn an income.

By working and waiting to take Social Security after your full retirement age, you could give yourself a “raise” of 8% for every year you delay taking benefits between your full retirement age and age 70.

Working during retirement can have other benefits besides just financial. For instance, doing so can help you to stay active and connected to the outside world. This can be beneficial from a social, health or even a happiness perspective.

It is important to note, though, that if you work and receive Social Security retirement benefits before your full retirement age, you could face the Social Security earnings test, or even be taxed on portion (up to 85%) of these benefits, depending on how much other income you generate.

Can you really generate an ongoing income for life?

There are ways that you can generate an ongoing income without having to rely solely on Social Security or working during retirement. This can be achieved through an annuity. By nature, annuities are designed to provide an ongoing income stream, either for a set period of time, or even for the remainder of your lifetime – regardless of how long you may need it.

There are many different types of annuities, though, such as:

With the security of an income stream from an annuity, you can pursue activities in retirement – either paid or unpaid – without having to worry about running out of money at a time when you need it the most.


  If you take benefits at age:
  

  Monthly benefit amount:
  

  Amount of $ increase:
  

66

$2,000

0

67

$2,160

8%

68

$2,332.80

16%

69

$2,519.42

24%

70

$2,720.98

32%
Social Security Delayed Retirement Credit Example Hypothetical illiustration for an individual whose full retirement age is 66, and initial monthly benefit is $2,000. Cost of living adjustments are not factored into this calculation.

What is the best age for you to retire?

So, what is the best age for you to retire? The answer to that depends on a number of factors, including your income sources, as well as how much you anticipate in future expenses. If there is a “gap” between these two figures, it could require that you take on outside employment.

But before you move forward, it is recommended that you first talk with a retirement income specialist who can help you to map out a plan. If you’re ready to learn more about how you can combine working in retirement with other incoming cash flow you’ll have in the future, contact an Alliance America advisor today and set up a time to chat.

Alliance America can help

An Alliance America financial advisor can assist you in maximizing your retirement resources and help achieve your retirement goals. Alliance America’s planning process is focused on personalized retirement income planning. As fiduciaries, our advisors are required to act in your best interest, and we are dedicated to helping you achieve the retirement lifestyle you seek. You can request a no-obligation consultation by calling 888-864-2542 today.

Income

Sources of income – whether derived from investments, Social Security or ongoing employment – are pillars of a sustainable and successful financial plan.

Growth

We need to expand our capacity, capability, creativity, understanding, sense of self and financial rewards as we progress through life and evolve as a person. We grow by striving to be better and reach our full potential.

Expense

A qualified fiduciary can help you plan for and manage the variety of other expenses you’ll face in retirement, whether paying taxes or simply ensuring that your costs of living are met.

Assets

The total of all your assets is important to know, but it’s only part of your considerations. Whether you are just starting out saving modest sums for retirement, you need a personalized plan to provide for your needs in life.