By Greg Lohr, MBA and Ethan Lohr, CFP®
People spend their whole lives working to finally retire and live out their golden years stress-free. But with increased life expectancies, medical advancements, and retirements that can last 30-plus years, more and more people are working well past the traditional retirement age of 65. No matter if you choose to continue working full-time, or you decide to reduce your hours and focus on an “encore career,” there are many unique opportunities and financial considerations that should be kept in mind. If you are thinking about working past retirement age, here are 3 things to consider before you make your decision.
Improved Mental and Physical Health
“Encore careers” can provide interesting opportunities that weren’t practical earlier in life. Now that you’ve reached an age where you can retire, working can be more about doing what you enjoy instead of what will make ends meet.
Whether it be working to support a favorite cause or even channeling your passion into your own small business, working after retirement can be a great way to find purpose in your life. It can give you a sense of being a part of something without being tied to a career and long hours. In fact, people who work after retirement often remain more active and socially connected, which can mean better overall health and fewer medical issues. Research has shown that those who live a purpose-driven life are more likely to live longer than those who don’t! (1)
Changes to Your Government Benefit Eligibility
Though there are mental and physical health benefits to continuing to work after retirement, there are a number of financial considerations that can’t be ignored. Working in retirement could impact your retirement benefits, specifically Medicare eligibility and Social Security benefits. Here are some points to keep in mind as you decide if working after retirement is right for you:
- Social Security benefits may be reduced if you retired early but went back to work. If you continue earning income before full retirement age but after you officially retire, your benefits could be reduced if your income exceeds certain limits. This reduction is only temporary and no longer applies once you reach full retirement age. (2)
- Delaying Social Security benefits until you reach age 70 can help maximize your benefit amount. This is a great opportunity if you are earning enough money to support yourself and don’t necessarily need your benefits to cover your living expenses. Social Security benefits can be claimed from ages 62-70, but the longer you wait, the more you will receive.
- Working longer can also increase your Social Security benefits if your continued work history replaces years with zero earnings or is higher than previous income from your record.
- Continuing to work past age 65 can affect your Medicare eligibility. Be sure to work with a financial professional to understand how your specific employment situation will alter your eligibility before making your retirement decision.
The rules surrounding Social Security and Medicare are confusing and there are many details that must be weighed. Don’t leave Social Security and Medicare considerations to the last minute to sort through. The earlier you start incorporating these factors into your overall financial plan, the better chance you have at a successful retirement.
Managing Your Taxes
Working in retirement could also affect your taxes, so it’s important to proactively plan when you are going to receive income and what type of income it will be. For instance, if you continue to work even after claiming Social Security benefits, your otherwise tax-free benefits could become taxable if you have a combined income over a certain threshold.
Similarly, you may have years in which your income is lower. Often this is a good time to think about accelerating income from tax-deferred sources and/or converting assets to tax-free accounts before Social Security or required minimum distributions begin.
Working through retirement is a timing game, especially when it comes to taxes. The goal is to never artificially push yourself into a higher tax bracket just because you took the wrong type of distribution, or earned too much money in one year. This is what we focus on with our 4 Buckets Income Strategy. We will help you manage your taxes through variable income levels so you can feel confident in your decision to continue working past retirement.
How We Can Help
Are you nearing retirement and wondering if you should keep working past 65? At Lohr & Company, we can help you navigate the next chapter of your life with confidence and find a fulfilling path to retirement. Schedule a complimentary introductory meeting online or reach out to us at 434-260-6742.
Greg Lohr founded Lohr & Company, a multi-generational financial advisory firm, in 1993 to help more people plan for a rewarding, well-deserved retirement. Before he entered the financial services industry, he worked as an electrical engineer. But after spending a few years as an engineer, he decided to follow his heart and return to school for an MBA in finance from the College of William & Mary. Although he originally entered the finance industry because he was excited about the personal opportunities, it was the satisfaction of seeing people at peace with their money that has kept him here for his entire career. He is passionate about building lifelong relationships with his clients and walking with them as they navigate financial decisions and milestones.
When he isn’t working, Greg enjoys spending time with his beautiful wife and their adult children. In addition to managing their family farms, Greg and his wife also manage a growing Airbnb venue. In the cold weather months, you can find Greg hunting whitetail deer in the breathtaking Virginia landscapes. To learn more about Greg, connect with him on LinkedIn.
Ethan Lohr always knew his dream was to follow in his father’s footsteps and carry out his same mission: to help more people find financial peace and security in retirement. Ethan started practicing for his future career quite early, at the age of 6, advising his sisters on their savings with the help of his trusty calculator. But it wasn’t until he graduated from James Madison University that he truly began developing his talent as a financial advisor at Lohr & Company. Ethan is a CERTIFIED FINANCIAL PLANNER™ professional.
Ethan is most fulfilled when he’s helping clients develop a sound plan and then executing that plan. He knows that pre-retirees often have many unanswered questions and may be feeling trepidation about retirement—and rightfully so. Retirement is one of life’s greatest transitions and Ethan knows how important it is to get everything right the first time. He works to ease his clients’ fears, provide them with confidence, and help them take the necessary actions to move forward.
When he isn’t serving clients, Ethan enjoys spending time with his wife and two sons. You can also find him practicing his swing on the golf course, exercising, and hunting with his dad. To learn more about Ethan, connect with him on LinkedIn.
Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Advisor. Fixed insurance products and services offered through Lohr & Company, LLC or CES Insurance Agency.