Week 10: Working in Retirement

Course Progress:

“The trouble with retirement is that you never get a day off.”
— Abe Lemons

Does the idea of working in retirement sound contradictory? Maybe we’re using different definitions.

If retirement means “not working,” as it does for many people, there is indeed a contradiction.

But the definition of retirement we’ve been operating under throughout this course is a period in your life where you’re happy, fulfilled and financially secure.

Work may well be a part of that retirement, something you fit in between rounds of golf or time lounging on a breeze-kissed beach.

But you might also consider working part-time while transitioning to full retirement. You wouldn’t be alone.

If you have the skills, the work is out there.

Right now, older workers — age 55 and up — make up at least a quarter of all U.S. workers. The 65- to 74-year-old and 75+ age groups are the fastest-growing age groups in the labor force now, the U.S. Bureau of Labor Statistics says. By 2024, baby boomers will be 60 to 78 — and about 1 in 12 will be working at least part-time.

This week we’ll talk about why you might work during retirement, where to find jobs and the tax implications of earning money while collecting Social Security.

Age is just a number

When you reach retirement age you’ll likely be better educated, healthier and have a longer life expectancy than your parents had at that age. But you won’t necessarily have more money.

This is your life’s third act — and you’re writing the play. With planning, you can define the shape and duration of your work in retirement, if you decide to work.

Read: “How to Use the ‘Gig Economy’ to Boost Your Income”

It might be full-time or part-time; you might be self-employed or launch an entirely new business. There’s nothing saying you can’t even start a new career if that is part of your retirement vision.

Bottom line: If you’ve been paying attention to all the important numbers we’ve talked about so far, age itself is one you can safely ignore.

6 reasons to keep working

Consider these realistic scenarios.

  1. Not enough in savings: Maybe you’re not sure your savings will last, so you want income to supplement your pension, 401(k) or Social Security checks.
  2. Waiting to tap benefits: You may need to delay Social Security benefits to get larger checks, or to let your retirement plan investments grow.
  3. Paying for health insurance: If you or your spouse plan to retire before you are eligible for Medicare, consider that private health insurance premiums for people ages 55-64 average $790 per month.
    On Medicare? You may still want to work to cover your costs for Medicare Part B, Medicare Advantage or supplemental (Medigap) insurance and prescription drug premiums. (More on this later.)
  4. Tanking investments: Stock market volatility, housing market dips and other adverse turns may shrink your portfolio, forcing you to make up the difference.
  5. Staying active: You seek the fulfillment, pride, social interaction and satisfaction of a job.
  6. Starting anew: Some use retirement to invest in a business, create a legacy, transition to a career with purpose or fulfill a lifelong goal.

Whatever your reasons, remember the work-life balance that helps you fulfill the vision you created in Week 1. Ask yourself:

  • Do I want to continue in some aspect of my career? Should I try something new?
  • What work schedule do I want?
  • How much job flexibility do I want?
  • How much responsibility will I accept?
  • How much money must I earn?

Where to start a job search

Go with what — and whom — you know.

Many companies hire retired workers as freelance consultants for special projects. Your company may offer part-time work related to your former job.

For entering a new field, consider whether you have any existing connections. Talk with others who’ve shifted careers.

Finding work and securing it are separate challenges.

You’ve got decades of experience and connections; don’t reinvent the wheel or start the slog back to square one unless you absolutely have to. Ask your friends, family and peers to keep their eyes peeled for opportunities. Referrals could go a long way.

Check these online resources for senior-oriented advice and job postings:

Also, try job boards like Indeed.com and Monster.com.

Dealing with ageism

It’s not fair, but people may prejudge you based on your age. While age discrimination is illegal, unintentional biases are not uncommon.

Overcoming stereotypes may require some extra communication on your part. Here’s some advice:

  • If you haven’t been job hunting in a while, be sure you’re up-to-date on the hiring processes that local and national companies use. Even getting a clerk job at your local Target or Ace Hardware, for example, may start with you filling out online applications, so be ready.
  • Use your cover letter, resume and interview to emphasize your experience, skill level and accomplishments, not so much your career longevity.
  • If you’re pivoting careers, point out transferable skills you have. Note your technology training and skills.
  • Assure potential employers that you are not wedded to, “We always did it this way at my old job.” Be sure they understand you’re comfortable with change, you have no problem with younger managers supervising your work and you can follow their protocols.

If you’re interviewing for a job and a potential employer seems uncertain of you because of your age, try emphasizing your track record:

“I have decades of experience when it comes to showing up on time, dealing with challenges and adapting to a changing landscape. True, less experienced people might turn out to be an asset to your company. But why take the risk? Wouldn’t you rather work with someone who definitely will be?”

Use your age as an advantage. Don’t treat it as a handicap. Check out this video’s advice on helping a 74-year-old Money Talks News reader find work:

Your age is not something to be ashamed of and not something that should ever disqualify you.

A new job may entail doing something meaningful or offer a chance to work in public service, an educational role or to learn new skills.

It is the mission of Encore.org to create such jobs. The Encore Fellowship program places experienced professionals with not-for-profits for 1,000-hour contracts, many of which may become permanent positions.

What skills do you have skills that might help you transfer to a new career? Consider:

There are even more ideas for retirement gigs in our book, “108 Easy Ways to Earn Extra Cash.”

Work from home?

The chance to work from your home can sound alluring. And an increasing number of workers do enjoy wearing their fuzzy slippers on the job.

But carefully vet work-from home advertisements, as scams are sprinkled among the legitimate job opportunities. Or use a service like FlexJobs, a subscription-based jobs board that manually screens work-from-home jobs and other flexible job postings.

“We definitely see people who are around retirement age who either want or need to keep working,” says Brie Reynolds, a FlexJobs senior career specialist and coach. “Phased retirement, gradual retirement, working retirement — whatever you call it, more people are working in some capacity rather than stopping altogether.”

Combining AARP job rankings and postings in its database, FlexJobs lists some “surprising” part-time work-from-home jobs for retirees:

  • Interpreter
  • Virtual assistant
  • Patient advocate
  • Customer service representative
  • Dietitian
  • Online tutor
  • Writer/editor
  • Accountant
  • Financial manager

That’s just the tip of the iceberg. If you have the skills, the work is out there.

How to find a retirement job

Finding work and securing it are separate challenges, especially if it’s been a long time since you’ve had to update your resume or interview for work.

From our story, “10 Tips to Land an Awesome Job When You’re Over 50”:

No one really wants to spend their time job hunting when they want to be heading down the home stretch for retirement. And yet, for reasons ranging from pink slips to wanderlust, plenty of 50-plus workers find themselves sending out resumes.

Unfortunately, looking for employment at this age can leave you feeling somewhere between discouraged and hopeless. It doesn’t need to be that way. Indeed, some outlets are going so far as to use the word “hot” to describe the job market for older Americans.

While that last point may be up for debate, we’ve got some tips to help you overcome employer objections to your age. Read on for great pointers on overcoming age prejudice and landing a job after you’ve passed the half-century mark.

1. Update your tech skills.

A hiring manager may automatically assume a 20-something job candidate knows their way around technology and assume the opposite of older applicants. Prove them wrong.

Update your skills with training before beginning a job search. Be adept at using programs and applications required by positions you want. (Your library may offer free basic computer literacy classes.)

2. Get online.

Create — or polish — your online presence. HR departments are more likely to plug your name into a search engine than call your references. What will they find? Crickets?

Set up a LinkedIn profile. It is your online resume, so add a professional photo and details about your work experience.

3. Edit your resume.

Your application must shine. What’s more, many employers screen applications automatically, making it hard for solid applicants to be noticed. Play down your age by eliminating dates on your education and limit your work history to the last 15 years.

4. Leverage your networks.

Time to put all those connections you’ve made over the years to good use. Pick up the phone, shoot an email or send a text. Be direct and to the point. Say you’re looking for a new position and ask if:

  • They know of opportunities.
  • They will serve as a reference or write a recommendation on your LinkedIn page.

5. Emphasize your experience.

You probably have a boatload of experience. Use it to your advantage.

Once you get to the interview stage, don’t skirt the issue. The interviewer may already be thinking about your age, so go ahead and acknowledge it and explain how your experience can benefit the company.

Stress specifically (assuming it’s true) that you’ll need little to no training to hit the ground running, saving the business time and money.

6. Find companies that value older workers.

It may be easier to focus on employers that value older workers.

Use these as a starting point:

7. Be willing to bend on income.

Your experience can be an asset, but employers might see dollar signs when they consider it. You deserve to be well-compensated for your experience, but some income is better than no income. To re-enter the workforce quickly, you may need to be flexible with your pay requirements.

8. Volunteer while you look.

Make good use of your downtime. Volunteering gets you out of the house and making connections that could lead to paid work.

Search VolunteerMatch for opportunities, or offer your help with your local chamber of commerce or professional organizations.

Starting a business

Your retirement can be the right time to take your experience, training and interests and create the business you’ve always wanted, or to create a legacy for your family.

Some retirees turn kitchen skills into bakeries or restaurants, photography enthusiasts sell their services to document events like weddings or corporate meetings, former teachers tutor students.

The possibilities are endless, but they also come with significant risks. Don’t sacrifice the financial stability you’ve worked so hard for.

Here is some advice from the U.S. Small Business Administration:

  • Conduct market research: Gather information about potential customers and businesses already operating in your area to find your competitive advantage.
  • Write your business plan: Spell out how much money you’ll need to get started. Is it minimal, like a good laptop and a car because your knowledge is your capital? Or do you need money to rent space and buy inventory and equipment? Do you have that money or need to borrow some to get going?
  • Pick your location: Whether you’re setting up a brick-and-mortar business or launching an online store, the choices you make could affect your taxes, legal requirements and revenue.
  • Check the legalities: Will you be a sole proprietor consulting with clients? Or do you need to set up a partnership, limited liability company or some type of corporation? Do you need legal services, licenses, registrations or permits?

You can also seek business mentoring and free or low-cost training through SCORE, a national nonprofit with chapters across the country dedicated to helping launch and grow small businesses through every step of the process. Many volunteer mentors are retirees themselves, looking to give back to their community.

If it’s your dream, no doubt you can make it happen. But starting a new business is not for the unprepared, nor the faint of heart.

A proven business model

If you want to go into business for yourself but not by yourself, a franchise might be right.

You might think at first of McDonald’s or a fitness center, but there are thousands of franchise businesses, from home cleaning to pavement sealing to doggie daycare and even drone photography.

One thing they have in common: a business model to follow to help you achieve success.

Do your homework on the companies, however. Not all business models are created equal. And there’s no shortage of pyramid schemes and scams masquerading as “business opportunities.”

Before investing, you also need to think about your interests, skills and experience, and how hands-on you will want to be.

“You aren’t too old, and your knowledge and experience are tremendous assets any franchisor would be lucky to have,” says Jack Johnson, co-founder with his wife Jill, of The Franchise Insiders. Their consulting company connects clients to franchise opportunities.

Retired clients often want to start a business for the family, Johnson says.

“They use their knowledge to help a son or daughter get the business started and create a family asset that can be worked in for years.”

Caution: Earning income while collecting benefits

None of this should discourage you from taking on any high-paying work you can get, but you’ll want to factor it into your budget and tax planning.

Social Security penalty

We talked previously about how working while collecting Social Security can cause your benefits to be taxed, but we should take a moment to recap and consider taxes from the other side of the equation.

You already know how your combined income — wages, retirement checks and other items that affect your adjusted gross income, plus nontaxable interest — affect how your Social Security benefits are taxed.

But there’s something else to consider: Claiming Social Security while you’re working can trigger a financial penalty if you haven’t yet reached “full retirement age” (66 to 67, depending on your birthdate).

Generally, Social Security deducts $1 from your benefit check for each $2 of your income over a limit — $17,040 in 2018.

The Social Security Administration explains the details in this pamphlet. To understand the full effect on your earnings, call or visit your local Social Security office.

The deductions stop on the month you reach full retirement age. If you are working and at full retirement age or above, no deductions apply.

You’ll get it back eventually: If some of your retirement benefits are withheld because of your earnings, your monthly benefit will increase starting at your full retirement age to take into account those months in which benefits were withheld.

Other costs of working while collecting benefits

Earning a paycheck while collecting retirement benefits has the potential to affect your finances in other ways:

  • Increased federal income tax. If your “ordinary income” comes from your IRA or 401(k) distributions, Social Security benefits, and interest and dividends, be aware that your retirement job earnings could move you into a higher tax bracket.
  • Bigger Medicare premiums. Extra income in retirement could also trigger higher costs for your monthly premiums for Medicare Part B (health care providers) and Part D (prescription drugs). For 2018, costs increase if your adjusted gross income is above $85,000 for individuals and $170,000 for married couples filing jointly. We’ll be talking more about medical costs in a couple of weeks.
  • Higher capital gains tax. Your work income can boost what rate you pay if you owe long-term capital gains tax on profits from selling stocks or bonds, real estate (except your home), cars, boats and other items held for over a year.

For 2018, for example, here are the tax rates on long-term capital gains:

Rate Single Married Filing Jointly
0% $0-$38,700 $0-$77,400
15% $38,700-$426,700 $77,400-$480,050
20% $426,700 or more $480,050 or more

Example: Say you’re married filing jointly and your household income without a job is $58,000 based on half of your Social Security income, distributions from your retirement accounts and interest on your CDs. If you sold a yacht you had for five years for a profit of $5,000, your tax on that gain would be zero.

Now say also earned $20,000 from your retirement job, so your total “ordinary” income was $78,000. Now you also owe a tax of 15 percent, or $750, on that $5,000 boat-profit sale. This is a pretty simple example; you may need to consult a tax professional or software to see your real picture.

Your task for this week

Ask yourself these questions:

  • Will I need a job in retirement to fund necessities?
  • Do I need a job to have enough money to spend on leisure activities?
  • How much time do I want to spend working?
  • How will working affect my retirement dreams?

These answers will help focus your time and energy as you approach retirement. Use this flow chart to help. And share your tips and takeaways in our Facebook group!

Download: Week 10 Worksheet: Working in Retirement


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