Does retirement have to be 100% not working?

“The golden age of retirement” is a saying you may have seen in advertisements or movies, or even heard at a retirement party toast. It typically refers to the years past age 65 when people are traditionally expected to no longer be active at work.

Like everything else today, definitions are changing. Having the time and the resources to do what you want to do is now the new definition of “gold.” Or, to put it another way – “gold is the new age.”

Many people consider retirement to be a time of opportunity that includes a sport or hobby, spending time with family and—also—starting a new career. The career may be based on a hobby or a lifelong dream. It may involve consulting in a familiar industry at a reduced schedule, or possibly staying active in the community with a job that impacts the environment, the neighborhood or another social cause.

There are also people who may have reached retirement age (which the government identifies as 65 for those born before 1955 and increases to 67 for those born after 1960), but have need for additional income to support the lifestyle they wish to live. Some people may choose to retire early, but discover that their financial savings aren’t enough to cover expenses, especially if they’re not yet eligible for Medicare.

For people who don’t want to be 100 percent leisurely in their golden years, there are a few financial considerations that should be thought through before leaving a full-time career, including:

(Note: It’s a generally good idea to start finalizing these strategies between the ages of 55 and 60)

Social Security – The earliest a person can qualify for Social Security is age 62, but there’s no requirement to begin collecting Social Security at that age. In fact, the monthly payments received at age 62 are only calculated and dispersed at 70 percent of the full retirement amount, which could mean that you receive less, overall, than you’re due if you start this early. People who retire from a career, with savings and investments, and who take a part-time position, may find they can delay taking Social Security until full retirement age (generally considered to be between age 67 and 70) because of the added income they have, which can supplement savings.

People should also keep in mind that Social Security income can be taxable, which can influence their plans. Ask your financial advisor to calculate what your Social Security income would be at age 62. Compare that to the calculation of delaying until full retirement age, or waiting until age 70 when payments are maximized. Delaying your benefits by even one year can increase the amount you receive by about 8 percent—a strategy that can benefit married couples in particular, in situations where a surviving spouse would benefit from joint life distributions.

Your age and healthcare expenses – Medicare benefits do not apply until age 65, and monthly health insurance premiums can add up quickly if they are not included as part of a company benefit. These costs need to be calculated into your expected retirement budget if you plan to stop working prior to qualifying for Medicare. And if you do qualify for Medicare, but decide to continue working, be sure you sign up for Part A. Do this even if you have employer-offered healthcare benefits. If you miss the deadline at age 65, if could affect your Medicare coverage in the future.

Tax bracket incomes – It’s often assumed that individuals and couples will drop into a lower income tax bracket when they retire. However, this isn’t always the case, especially if the budget you’ve calculated includes lots of travel where larger withdrawals may be needed from your retirement income to cover your journey. Retirees pay estimated Federal income taxes quarterly, and if not properly planned for, those costs can add up quickly. If you choose to take a part-time job, or turn a former hobby into a business, be sure to calculate how that income could affect your family’s tax bracket. Knowing what your expected taxes will be will help you determine what types of retirement income to use—Social Security, retirement accounts or other types of investments.

Thanks to advances in healthcare, many people are feeling younger and more energized when they reach retirement age. The golden age can provide options for those who want to continue working at their career, retire and take on a new part-time job, or retire fully and spend the time working on hobbies, travelling and visiting with family. If you’re starting to plan your life after retirement, be sure to work with a financial advisor to help develop a written plan that will best match your interests and financial needs.

Mike Poulter[1]Michael Poulter is the Salt Lake City market leader for U.S. Bank Private Wealth Management

U.S. Bank and its representatives do not provide tax or legal advice. Each individual’s tax and financial situation is unique. Individuals should consult their tax and/or legal advisor for advice and information concerning their particular situation.

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