To work or not to work? If you’re nearing retirement age, that may be a question you’re asking.
Having a job in your senior years has advantages, but it’s not a universally great solution. To help you decide if a working retirement is right for you, here are two pros and three cons you’ll want to consider.
Pro: Your health may benefit
Several studies show a connection between working at older ages and improved cognitive function. The basic theory is that work provides mental and social stimulation, and that activity can keep you happier and sharper in your senior years.
Those health benefits are likely more pronounced when you don’t have an active friends group or hobbies you love. On the other hand, if your current profession is emotionally demanding and time-consuming, the stress of working might offset the benefits.
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Pro: Your savings may last longer
Continuing to earn a paycheck should take pressure off your savings. If you can keep contributing to your retirement account and delay your Social Security, you benefit three ways:
- More of your savings stays invested and working for you.
- Ongoing contributions add to your share counts, increasing your future earnings potential.
- When you delay Social Security, your retirement benefit increases. This is the trade-off for forgoing income upfront.
Con: Working may not fix a savings shortfall
Finances are a common reason seniors keep working in retirement. Unfortunately, continuing to work isn’t a failsafe solution for a savings shortfall.
Continuing to work might even backfire. This can happen if there are unresolved issues that caused you not to save enough. If you spend more than you make, don’t prioritize saving, or haven’t mastered the art of budgeting, earning a paycheck is only a temporary patch.
Once you can’t work anymore, you’ll likely still have insufficient savings — and no great solution to fix it.
If money is the reason you decide to work in retirement, be straight with yourself about why you are underfunded. Fix those issues as you continue to work. That gives you a better chance of enjoying a traditional retirement without a big lifestyle downgrade.
Con: Your Social Security may take a hit
If you work and collect Social Security before full retirement age (FRA), you are subject to income thresholds. Make more than the threshold and your benefit will be reduced.
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