Retirement is something you either look forward to or dread, especially if your investments are not performing well. Maybe you don’t want to lose the camaraderie of working with your colleagues. Whatever your reason for working during retirement, there are a number of financial benefits.
You can maximise savings
Working in retirement – even for a year or two – means that retirement savings don’t have to last for so long. This means you have more money to spend, or more money in reserve against financial emergencies. By working during retirement, you may even be able to add to your retirement savings portfolio.
This is an important financial benefit. While responsible people will make financial plans for retirement, no individual can know how long that retirement will last, so the bigger your investment portfolio, the less risk that your retirement funds will not see you through.
Pension plan boost
Some pension plans may provide a higher pension if you defer the claim because you choose to continue working. In addition, you may earn extra pension credits if you work beyond the earliest claim date. However, if your pension is conditional on final salary and your retirement earnings are lower than your pre-retirement salary, you could cancel out benefits and end up with a lower pension.
You can still draw social security retirement benefits
For those born between January 2, 1943 and January 1, 1955, the full retirement age is 66. Anyone who works after that age can keep all their social security benefits. There is a sliding scale of deductions if you reach full retirement age during the year, but the allowances are generous, particularly in the year you reach full retirement age. Once you reach 66, benefits are recalculated, leaving out the months where benefits were reduced.
Other pensions, investments and annuities do not count towards your income. Deduction of social security benefits is based solely on the income you receive as wages. Special arrangements apply to those who are self-employed and work during retirement.
You can defer benefits
If you continue to work during retirement, you can choose to defer your social security benefits. By waiting to claim until age 70, you will receive between 5 percent and 8 percent extra for each year you wait. There is no financial advantage in delaying the claim past the age of 70.
To determine whether it would be financially beneficial to continue working after retirement, consult an independent financial adviser. Individual circumstances such as specific pension plan restrictions and retirement savings need to be taken into account before reaching a decision.