IN THIS CHAPTER

Considering your options for working during retirement

Making the most of your retirement even if you are working

You may envision a life during retirement as being one where you completely stop working. Then you can sit back, relax, and really enjoy life.

Unfortunately, this scenario is only a dream for some people. Due to a wide variety of reasons ranging from unexpected medical bills to sub-par investment returns, you may have to keep on working in some capacity during what you thought were supposed to be your retirement years — whether it be part-time or seasonal work or even a full-time job in another career. You may also find that “retirement” isn’t what you bargained for and that you miss interacting with others and getting out of the house.

The good news is that some employers offer part-time work, which allows you to potentially have some of the best aspects of your working life (money coming in and contact with people) combined with some of the best aspects of retired life (more free time and less stress). In addition, some companies allow (even encourage) workers to telecommute (work from home). For those of you who want or need to continue to work on a full-time basis, this may be an attractive option.

If you find yourself in a situation where you may want or need to work during your golden years, you’re not alone. This chapter discusses some important pointers for you to consider when working during what are normally considered retirement years.

Some Work Is Good for You

If you enjoy the people you work with, continuing to work at least part-time may be worth your while. Some research actually supports potential health benefits for those folks who stay active in the workforce.

Researchers Yujie Zhan, Mo Wang, Songqi Liu, and Kenneth Shultz analyzed data from more than 12,000 participants in the national Health and Retirement Study. Their review of the health records of retirees, which controlled for people’s health status pre-retirement, found that retirees who move from a full-time job to part-time work enjoy better health than folks who cease working completely. Specifically, those who transition to part-time work had fewer major diseases and were found to function better with day-to-day activities than those who stop working altogether.

We should point out one nuance of the study: The best health as a group was observed in those who continued part-time work in the same field or line of work they had worked in full-time. Workers who changed careers, which the study’s authors found happened more with retirees’ struggling financially, didn’t enjoy the improved health status of the part-time workers who didn’t change fields. The study’s authors reasoned that career changers trying to make more money may have had more stress than those who chose to continue with their previous line of work.

The Social Security (Tax) Impact Can Be Huge

Before you set out to work in your golden years, you had better understand the tax bite you may have to pay on your Social Security benefits. And these days, plenty of retirees get whacked with federal income taxes on these benefits.

You’ll owe federal income taxes on your Social Security benefits if your other income (from work including self-employment income, interest, dividends, and other taxable income that must be reported on your tax return) exceeds certain thresholds. Here are the guidelines to keep in mind:

• Single taxpayers with a combined income between $25,000 and $34,000, and married couples filing jointly with combined income between $32,000 and $44,000, have to pay income tax on up to 50 percent of their benefits. (Combined income is defined as your adjusted gross income plus nontaxable interest plus one-half of your Social Security benefits.)
• Singles with a combined income of more than $34,000, and married couples filing jointly with a combined income of more than $44,000, may pay income tax on up to 85 percent of their benefits.

The effective tax rate on that “extra” employment income can end up being huge if you get whacked with taxation of your Social Security benefits. Between regular federal and state income taxes on the additional employment earnings and the taxation of your Social Security benefits, you may see half or more of your extra income siphoned off to pay taxes — ouch! (For more on this important issue and related decisions, refer to Chapter 10.)

Number Crunching Can Show You How Different Scenarios Work

Some folks who approach retirement short of funds resign themselves to continuing to work full-time in their pursuit of income. This scenario isn’t always necessary, however. If you haven’t crunched some numbers and considered all your options, you may be missing a better approach.

For starters, be sure to examine how your expenses may change if you were to work part-time rather than full-time. Perhaps you would spend less eating meals out or on other services if you weren’t so pressed for time. Your commuting costs likely would decrease as well. It may be easier for you to reduce your expenses than to work so many hours for so many more years. If you’re a homeowner, crunch some numbers to determine whether tapping your home equity can help finance your retirement.

Life Is Short and You Owe It to Yourself to Do What You Love

Life is short, so if you have to work during your later years, make sure you do it in a job you enjoy. We’re not suggesting that you ignore financial considerations. But you owe it to yourself to do something you really like. Otherwise, the workdays will drag.

For example, Lloyd worked as a corporate trainer for many years, but the job lacked the proper spark to make him hop out of bed. Brainstorming with a friend one day about things he enjoyed doing, he spoke of his joy coaching and working with kids. Long story short, Lloyd became an educator in a small private school near his home. His pay was modest but he loved the work, schedule, and vacation time the job allowed.

Investing in Education Can Boost Your Employment Value

Going back for some schooling can be a joy in and of itself, but furthering your education also may enhance your employment earnings. Of course, with more of your career behind rather than ahead of you, you should compare the expected benefit to the costs of furthering your education and training.

Where can you find educational opportunities? Check out so called “adult” or “continuing” education divisions of colleges and universities within a reasonable driving distance of your home or from reputable institutions online. Targeted training seminars may make sense for you as well. When in doubt, ask prospective employers and contacts you have in the industry what education and training is best given your job interests.

Some Employers Are More User-Friendly for Older Workers

If you need or want to work during retirement, look for employers that are open to older workers. You may choose to stay within your chosen career but change employers for any number of reasons. Perhaps you can be paid more, have more interesting responsibilities, or gain a better boss.

AARP, which is a nonprofit membership organization for people age 50 and older, publishes an annual listing of employers — called the “Best Employers for Workers Over 50” — that it views as providing the best work environment for older workers. For more information, visit http://www.aarp.org/work/employee-benefits/best_employers/.

Taking Some Employment Risk Is Important

As most individuals age, they generally take fewer risks. Quitting your job and doing something completely different when you’re 22 years old and single is one thing. But it’s quite another to contemplate the same move at age 52, especially if you have dependents and are still accumulating your retirement fund.

The amount and type of risk you can take with regard to work in your retirement years should depend on your financial situation and other factors, such as your health, desire to travel, and so on. For example, have you dreamed of changing careers your whole life but never could bring yourself to take the plunge? Don’t live your life in such a way that you’ll look back with regret at not having taken some chances to pursue something you really would rather have done.

Starting/Buying a Small Business May Be a Rewarding Option

Among the riskier but potentially most rewarding (emotionally and financially) work options would be for you to start or buy a small business. Older workers are successful with this venture because they can draw on their many years of work and life experiences as well as the contacts they’ve accumulated over the years.

Be fully informed as to what you’re getting yourself into before you make the final commitment. Make sure that you are willing and able to devote the time and effort most businesses require. And, be sure you can afford the required financial drain to go this route.

Your Spouse May Not Want What You Want

Many couples fail to adequately discuss what changes they’re considering in their working lives as they head into their retirement years. For example, your spouse may be assuming that you’ll have lots of free time to travel and do other things, but you may be envisioning working 30 hours per week and playing more golf. Make sure you and your spouse are on the same page when it comes to retirement and whether the two of you will work.

We can’t stress enough how important it is that you and your spouse or significant other are thinking along the same lines and have the same expectations regarding your retirement. To avoid any unnecessary stress and bickering, schedule some time to discuss your retirement expectations and dreams with your spouse. You may even go so far as to take some notes as you clarify your different points of view. Then you can use those notes at a follow-up discussion. At a minimum, you should extend your spouse the courtesy of disclosing your intentions and hopes and know going in how your spouse feels about your plans.

Volunteering Makes You Happy and Benefits Your Community

If you have no financial need to work for income, check out volunteer opportunities, which can provide many of the same benefits that paid work provides. Plenty of organizations and people in your community and around the nation could benefit from your time, interests, and expertise.

Check out these organizations and sources to find some opportunities that fit your interests:

• Idealist: This organization provides lots of information on volunteer opportunities and other topics, including jobs, organizations, and internships, among others. Visit www.idealist.org or call 646-786-6886 for more information.
• SCORE: A partner of the U.S. Small Business Administration, SCORE is a national association dedicated to helping small business owners form and grow their businesses. Headquartered in Herndon, Virginia, SCORE has more than 300 chapters. Visit www.score.org or call 800-634-0245 for more information.
• VolunteerMatch: Based in San Francisco, VolunteerMatch helps connect people and good causes. This service is used by more than 100,000 nonprofit organizations. Visit www.volunteermatch.org or call 415-241-6868 for more information.