Postponing Retirement: Will You Have to Work Forever?

Five tips for readjusting your financial game plan

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I heard recently from an old friend who had been financially responsible her whole life but a layoff several years ago derailed her savings. Now she’s nearing 60 and panicked about whether she’ll be able to retire when she had originally planned to — if at all. Sound familiar? As the slowly recovering economy plods along, and many Americans confront shortfalls in retirement savings, these are common refrains from baby boomers and Generation X.

It can be a shock to realize that your much-anticipated retirement may not happen on the day — or month or year — you initially envisioned it and in the style you dreamed about. But many Americans are continuing to work past the traditional retirement age of 65 — or are re-entering the workforce after they’ve retired. July data from the U.S. Bureau of Labor Statistics shows that 7 million Americans age 65 and older were still in the workforce, up 63% from a decade ago. Some may continue working by choice, but many are likely still working due to financial necessity. According to new survey findings from the Society of Actuaries, more than 4 in 10 preretirees who do not expect to retire say it’s because they can’t afford to do so.

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To add to the stress, the emotional adjustment can be an even bigger challenge if you’re reconsidering your retirement date. So if you’re looking at your financial statements with a gulp, what can you do?

1. Don’t Get Hung Up on Age
You might think of 65 as being the year that you should retire. But consider when and how this “traditional” retirement age originated — and whether it makes any sense today. In 1935 the Social Security Act set the minimum age for receiving full retirement benefits at 65. But men born in 1930 were only expected to live until age 58. Today the average life expectancy is 75 for men and 80 for women. So look on the bright side: you might need to work longer because you’re probably going to live longer.

2. Understand Your Options — Now and Later
When calculating your retirement date and income, it’s important to get your financial facts straight about future income sources. Make sure you fully understand your Social Security benefit and what types of accounts your savings are held in. Determine how much your savings may grow if you work for another six months, one year, five years, etc. You may be surprised by how much your nest egg could increase if you delay withdrawals from your tax-deferred employer-sponsored plan, such as 401(k) or 403(b), by staying in the workforce for just a bit longer.

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3. Focus on Your Health 
Many people want to keep working past traditional retirement age but have health problems that prevent them from doing so. If your plan is to stay employed, it’s critical to do everything you can to maintain your physical health so you may work as long as you desire. Ensuring that you get adequate exercise, sleep and nutrition can actually be very important financial considerations. Similarly, it’s critical to have adequate health care coverage in place. A recent survey of retirees from the Society of Actuaries indicated that 24% of those interviewed were working in retirement in order to maintain employee benefits like health insurance — a valid financial reason to keep punching the clock. However, taking the time to understand the benefits of Medicare can be advantageous as you make employment choices.

4. Reconsider What Kind of Work You Do
Retirees are going back to work for a variety of reasons. While the Society of Actuaries survey indicated that 51% of retirees who were working in retirement were in it for additional income, an even greater percentage (55%) said they were still in the workforce because they wanted to stay active and engaged. If you’re working for a living, it might be helpful to think about how work will help you create and maintain your social life, sense of belonging and productivity. If you dread Monday mornings, your decision to stay in a 9-to-5 job may make you feel caged. So liberate yourself by finding something you love to do that will still provide a paycheck. It’s not too late to make a career change into a full-time or part-time job that will help you maintain meaning or challenge you.

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5. Prioritize and Make Trade-Offs
If you’re successful with Step 1, you may be wondering how to adjust your financial plan to match your new mind-set. Deciding how much longer you’ll be working will depend on what your essential expenses (needs) and your lifestyle expenses (wants) will be in retirement. Calculating this and adjusting your financial choices can be emotionally taxing, but it’s easier to make the trade-offs now to protect your financial future — so you won’t have to make as many later. So take some time to think and choose. Understanding your values and clarifying your priorities can help make these decisions a bit easier.

De Baca is vice president of wealth strategies at Ameriprise Financial.