Working past retirement

Retirement planning

TEXT OF STORY

Tess Vigeland: Used to be you'd get a job at a company, work there for 40-50 years and retire. You'd have a nice pension and you could spend the rest of your days relaxing and playing golf.

No more. These days, seniors are looking to stay in the workforce.

Some of them just want to keep active. Some didn't squirrel enough money away to retire. But here's one potential drawback to working though your golden years: If you're not careful, you can actually lose out on some money.

Stacey Vanek-Smith reports.


Stacey Vanek-Smith: Back in 1967, the Beatles imagined retirement like this:

[clip from "When I'm Sixty-Four":]: You can knit a sweater by the fireside, Sunday mornings go for a ride.

But Monday mornings could have a lot of retirees going for a ride to work. More than half of boomers say they haven't saved enough. Many are considering working past retirement age.

Stuart Ritter is a Financial Planner with T. Rowe Price:

Stuart Ritter: If folks are reaching the age where they're thinking about retirement and don't feel that they have enough money, working extra years is one of the most powerful ways to make up for that.

Working into your golden years can pose some problems. Chantel Sheaks is a benefits attorney with Buck Consultants. She says it can be especially complicated for seniors who want to work part-time:

Chantel Sheaks: The implications of going part-time are going to impact whether you make a contribution to your 401(k) plan. It may impact whether or not you're eligible for the health care coverage from your employer.

And a company's pension benefits are often based on your salary when you retire, so if you take a pay cut to work fewer hours, you risk your pension being permanently lowered. Social Security payments can also be docked if you earn a certain amount of money.

The Senate Committee on Aging is working to change some of these policies. It introduced a bill this week that would give tax credits to businesses that create flexible work plans for seniors. It's also pushing for health care and pension protections.

Senator Herb Kohl chairs the committee:

Herb Kohl: By doing these things, we will take care of our economic needs in the decades ahead and address the needs of seniors to stay in the workforce beyond age 65.

Kohl points out that over the next couple of decades, around 20 percent of our population will be over 65. That's a lot of experience leaving the workforce.

For now, people nearing retirement should check with employers to see what effect continuing to work would have on their benefits, says T. Rowe Price's Stuart Ritter. But, he says, the penalties that are in place shouldn't discourage people.

Stuart Ritter: It's like someone saying, "Well, I'm tired of paying all these income taxes, so what I'm going to do is tell my boss to give me a cut in pay."

Ritter says an extra year of work has a double benefit: it's an extra year of contributions to a 401(k) and an extra year of letting savings appreciate.

I'm Stacey Vanek-Smith for Marketplace Money.

About the author

Stacey Vanek Smith is a senior reporter for Marketplace, where she covers banking, consumer finance, housing and advertising.

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