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The landscape of retirement has changed substantially since the days of company pensions, company provided health insurance, and secure Social Security benefits. Many seniors are facing high costs of living in retirement and crunching the numbers before retiring is one of the best ways to avoid financial burdens later in life. Three things to consider as you budget for your retirement are first, delaying and withholding receipt of benefits, budgeting effectively, and the perks of working part time after retirement.
Delaying and Withholding
73% of senior Americans claim Social Security benefits before the full retirement age of 65. However, just because you claim them doesn’t mean you have to take the payout. Suppose you claim retirement benefits this year, at age 62, and your payment is $750 per month. Then, you get a part-time job to meet your expenses, and choose to have 12 months of Social Security benefits withheld. At full retirement age, you’d receive $800 a month because of the accrued delayed benefits. According to the Government Accountability Office, “the median income for those who delay was 45 percent higher after claiming benefits than for those who claimed early, and 33 percent higher at age 72.” The longer you can work before reaching the age of seventy, the more these benefits add up. For those who intend to continue working full or part time, knowing this distinction can make a huge difference dealing with monthly finances.
Budgeting Effectively
When budgeting for retirement, most senior Americans calculate their finances based on gross income rather than after-tax figures. They make the mistake of assuming that SSI benefits will not be taxed when in fact they are. Especially for those still working, if you make income during the year, even from investments, up to 85 percent of your SSI benefits could be taxable.
Not to mention, it’s important to factor in healthcare costs. Because Medicare doesn’t kick in until age 65, those that claim SSI benefits early might have a few years where health care costs become exorbitant. One method of paying these fees is trying to find a part-time job that offers health care coverage–although these kinds of jobs are pretty rare. Having extra health care coverage even after the age of 65 is a great idea because there are many gaps in Medicare coverage. Factoring in those costs before making a decision about managing your SSI benefits is vital.
The Perks of Part-Time Work for Seniors
There are more than just monetary perks for seniors still working after retirement. Of course, it’s nice to know your medical costs are covered and you’re financially fit enough to splurge here and there on grandkids and good food. But, it’s also psychologically beneficial. Quitting work cold turkey is difficult for anyone, especially in a society like America where your work is not just your livelihood, it’s your life.
A 2009 study led by Mo Wang, PhD, of the University of Florida, for The Journal of Occupational Health Psychology found that people who pursued post-retirement bridge employment in their previous fields reported better mental and physical health than those who retired fully. Also, a 2008 study on the changing workforce by the Families and Work Institute, discovered “that employed retirees report levels of health, well-being and life satisfaction on par with those who have not yet retired — despite age differences.”
Also, a study referenced by USA Today conducted by Carole Dufouil, a scientist at INSERM, the French government’s health research agency, says, “For each additional year of work, the risk of getting dementia is reduced by 3.2%.”
Another benefit of continuing to work after retiring from a career is the opportunity to keep paying down debt. When you’ve got high costs of living in retirement coupled with debt, there are other options to consider. Did you know you can sell all or a portion of your life insurance policy for an amount greater than the cash surrender value? Life settlements (also known as viatical settlements) can also be a life saver. Our website has answers for you, to these questions and others, like, “What is a viatical settlement?” Visit Life Settlement Advisors and learn more.
Case Study:
Dwayne’s wife of 45 years passed away last spring. The life insurance policy Dwayne owned was no longer needed so Dwayne sold his policy for $68,000 and used the money to help fund his grandchildren’s college education.
