If you are thinking of a career post-retirement, you are not alone.
According to a recently released study by the American Advisors Group, one-third of seniors are looking to work well beyond their retirement age or, in some cases, skip retirement altogether.
While many of the respondents in AAG’s survey are motivated by financial considerations, some seniors are opting to continue working after retirement for flexibility in their lifestyle.
However, when it comes to planning a career post-retirement, there are new factors that can pop up on your radar.
Will you pursue a flexible work schedule? Are you prepared for the tax implications of working past retirement? Does your current career support you working past retirement or will you pursue a new career?
Here are a few considerations to keep in mind when planning your career after the age of retirement:
1. Be Clear On How Much Of Your Income Is Eligible For Taxation Post Retirement
If you continue to work after retiring you will still need to continue paying federal income taxes. The dynamics of how your income is taxed will change if you work past retirement.
While any employment and self-employment income will be taxed for Medicare and Income taxes, you will also need to think about your Social Security benefits being taxed as well.
However, if your gross income is less than the standard deductions allowed for seniors your tax liability may be nil.
If you do receive income or dividends from your pension or investments during retirement age, these will also be taxed.
Therefore, it may be worthwhile talking to an accountant to have a clear view of what your after-tax income would be if you continued working after retirement.
2. Are You Planning On Staying In Your Current Role Or Striking Out On Your Own?
Another thing you will need to think about is if you want to stay in your current career or pursue a new career after retirement.
Many seniors are opting for second careers after retiring. It does however come with the need for careful planning.
For instance, you may need to retrain or seek financing to launch your own business.
If you do plan on leaving your employer, you may have to think about rolling over your 401(k). Most people leaving an employer are given 4 options: leave their 401(k) in their current employer’s plan, roll it over into an IRA, cash out their 401 (K) or roll it over into their new employer’s plan.
If you are planning for retirement and want to maximize the tax benefits, a 401k rollover can help to minimize the tax you pay on withdrawals.
This is because an IRA only allows tax-free withdrawals from the age of 59 1/2 while a 401k allows tax-free withdrawals from the age of 55.
Additionally, employees that are still working can access loans from their 401 (k) to help with the cost of transitioning to a new career post-retirement such as retraining, or pay expenses while you set up your own business.
3. Spend Time Mapping Out How Much Money You Need To Earn
The amount of money you need to earn will heavily depend on the kind of lifestyle you envision for yourself during retirement.
Your retirement plans and the flexibility you want from your job will help you define how much you would need to earn from your career post-retirement.
If you plan on working part-time or shifting to flexible working after retirement, your monthly income from your career will decline.
This will require some forethought and planning to supplement your income during retirement.
The amount you need to earn may also influence your career path after retirement as the need to earn significantly may mean you will have to stay in your current field to benefit from the higher rates paid for your years of experience.
Whether you want to keep working for financial or professional reasons, thinking ahead of what comes with it can help you prepare and make the transition go smoothly.
You can decide to continue working in a career you love or kickstart a second career act – it is up to you.