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A working retirement


En español | Planning to continue earning a paycheck in your later years? Here are four things to keep in mind.

Today, working in retirement isn’t a purely financial decision. Americans are living longer. At a time when the average 65-year-old can expect to live well into his or her 80s, what were once known as post-work years have become the springboard for new, fulfilling journeys — each different from the other. “Our whole concept of retirement is changing,” says Bill Hunter, director, Personal Retirement Solutions at Bank of America Merrill Lynch. “People want to stay vital.”

While everyone’s goals and circumstances will be different when it comes to work and retirement, it’s also a fact that continuing to work will affect your assets and may require new, careful strategies for managing your income. Here are some things to think about when considering working into your later years.

New careers come with new startup costs

3 questions to consider


How could my income scenario change based on several different retirement ages?


How might I be able to find capital to start a side business in retirement?


How will Social Security figure into my plans, and when should I consider beginning to receive benefits?

Perhaps retirement is your chance to transform an interest or a passion into part-time work. However, that transition can come with a price tag, and it’s best to be prepared for it in advance — ideally while you’re employed and outlining what your income and spending needs will be during your retirement years. You may realize, for example, that you’ll need additional training or education. Hunter notes that taking classes or training sooner might give you a better sense of whether you want to spend the next five-plus years doing what you had in mind — and whether your new job would be a viable option in today’s economy.

If your plan involves starting a business — such as opening a store — you also need to consider capital costs. It may be harder to get a small-business loan after you’ve retired because you’ll likely have fewer working years ahead of you to repay the money. However, you might consider taking advantage of some other options while interest rates are low. One possibility is to open a low-interest line of credit while you’re still employed. Hunter cautions, however, “If you want to start a business in retirement and are considering a loan, you should ensure that the money is not also supposed to be used to fund your necessary expenses in retirement.”

If you expect to be at least age 59½ when you launch your new venture, you can tap IRA funds, minus applicable taxes on the withdrawals, for startup capital. (Earlier withdrawals would be subject to ordinary income taxes and possibly additional federal taxes.) Hunter cautions, however, that your startup budget shouldn’t depend on funds you’ve set aside for your baseline retirement income needs.


Relocate with an eye toward your work life

The best places to retire may not be the best places for your new business. There are many reasons to consider relocating in retirement: warmer weather, being closer to children and grandkids, and lower property taxes, to name a few. If working in retirement is a priority for you, remember that location can have a major impact on expenses and quality of life. There are states that offer low unemployment, high job growth potential, a lower cost of living and a favorable tax environment — but they may not always be the best place to pursue the type of post-retirement career you’re considering.

As Hunter notes, many retirement locales heralded for having no state income tax generally have higher sales and property taxes, and there may be municipal taxes to consider as well. If your local taxes are high but you want to stay in the same area, he suggests considering moving to the next town over or relocating just across a state border as one option — provided that you discuss any such change with your tax professional ahead of time.

Rethink when you take Social Security



Americans who take Social Security prior to their full retirement age.1



Amount your total benefits could increase each year you delay receiving benefits until age 70.2

If your new paycheck allows you to delay taking Social Security, you should consider it. Postponing Social Security payments can boost your available retirement income when you most need it. Approximately 73% of Americans elect to take Social Security prior to their full retirement age1 — now 66 or 67, depending on when you were born, Hunter says. But there are several reasons to delay. For every $2 you earn above the annual earnings limit ($15,720 in 2016), $1 in benefits will be withheld. This continues until the year when you will reach full retirement age — now 66 or 67, depending on when you were born. At that point, the formula changes: $1 in benefits is withheld for every $3 of earnings above $41,880, until the month prior to when you actually reach full retirement age. (Once you do reach full retirement age, nothing will be withheld, no matter how much you earn.)

Even if you earn less than the threshold amount, you may be better off waiting if possible, Hunter observes. Each year you delay, beyond your full retirement age, your total benefits could increase by as much as 8% per year until age 702, when you earn the maximum. For example, a man who expects to take home $1,955 per month at age 62 can increase that to $2,607 by waiting until age 66 (his full retirement age), and to $3,441 if he delays until 70. “That’s a huge difference,” Hunter says.

Take a close look at your insurance needs

The cost of health insurance rises with age and changes in health status. That means it could well be a significant expense, especially during the years before you turn 65 and qualify for Medicare. If you retire from your primary career before then and work independently, you’ll need a plan for covering your medical and dental insurance. COBRA coverage may be available through your current employer’s health plan; if so, you may be able to purchase as much as 18 months’ worth at a lower premium than what you’d pay if you were buying on the open market. If you plan to work elsewhere, do your research and look for companies with generous benefits packages, or else negotiate opportunities so that health care compensation is part of the deal.


Many retirees choose to consult with the companies where they were working full time; Hunter suggests discussing with your company whether current health care benefits can carry over into part-time compensation.

Make sure to assess any other insurance needs and budget for them. A job that requires a lot of physical effort (such as running a farm) or travel may require insurance that takes such things into account. “You need to have health care, disability insurance and maybe long-term care insurance to make sure there isn’t a health event that could have a catastrophic effect on your wealth or portfolio,” Hunter says.

The key is to make sure you go into your second act with “eyes wide open,” he adds. That means looking at how the various aspects of your proposed plan affect one another. Your financial professional can help you run through the scenarios you may be considering and show you how various life changes could affect them so that you can create a strategy that makes sense for your situation.

“View each decision as part of another decision,” Hunter says. “Work with your financial professional to get you thinking about how they all tie together.”

Learn more and take action

  • It’s important to figure Social Security into your retirement income planning. View video >
  • Concerned about future medical costs? Learn more about how you can prepare for them. View article >
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1 Social Security Administration (SSA) Annual Statistical Supplement, 2013.

2, accessed August 5, 2016.

Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

The discussion of Social Security is general in nature, is intended for informational purposes only, and is not all-encompassing. The circumstances surrounding each situation differ, and additional eligibility requirements or restrictions may apply.


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