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Retirement doesn't have to be the end: How working longer benefits you

Planning to keep working instead of retiring? Jean Chatzky shares tips to prepare yourself for this next chapter.
/ Source: TODAY

Retirement isn't what it used to be. For some, it's something to look forward to after years in the workforce. But for others, there's no such thing as slowing down.

As part of our #StartTODAY series, there are reasons why retirement is longer the end and benefits it can have to your finances and overall health.

Today, 47 percent of retirees say they either are working or plan to work in retirement, according to research from Merrill Lynch and Age Wave. And 72 percent of people in the 50+ range – i.e. future retirees – say they want to do exactly the same thing.

Why is retirement no longer the end of worklife for so many people? There are two broad reasons: finances and your overall health.

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Today, 70 (and beyond) is the new 50. Retirement is no longer a time to just garden and visit the grandkids. Today’s healthier retirees want to stay engaged, stimulated, involved. Work does that. But there’s no disputing that in retirement, finances can become a challenge. That was particularly true for people who retired right as the Great Recession ramped up. When retirement can last 30+ years, that’s an awfully long time to a) make your money last. Also, as pensions (which provide a lifetime paycheck) have given way to 401(k)s (which you fund yourself), it’s more important to keep the income rolling in as well as boost the balance in your retirement accounts.

woman working at garden
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There are a number of health-related reasons to consider continuing to work.

It keeps you alive

Researchers at Oregon State University analyzed data from a large, ongoing study of people age 50 and up. What they found was that people who continued to work past 65 had an 11% lower chance of death from all causes.

It keeps you healthier

Researchers from the University of Miami studied more than 80,000 participants of the National Health Interview Survey, all of whom were at least 65 years old, and 13 percent of whom were still working. People in the work-force (particularly those with white-collar jobs) were significantly more likely to report their health was good, very good or excellent than those who were unemployed or retired.

It keeps you mentally sharp

And, interestingly, even people who thought they were doing it for the money, come around to realize that working improves their mental health. It keeps you connected to people, more current with technology, up to date on the news, and — generally — physically active.

It keeps reduces isolation

Dan Veto, senior advisor to AgeWave, says that isolation — one of the real risks of retirement — is as unhealthy as smoking a pack of cigarettes a day.

It gives you an identity

Work gives you a reason to get up in the morning. We all like to be able to say, here’s what I do — it gives you a sense of belonging to a unit greater than yourself.

Of course, there are financial benefits as well.

Your retirement account can continue to grow

The more years you work, the fewer you have to pull money out of your retirement accounts to live on (although you do have to start 401(k) withdrawals by age 70 ½, waiting until you’re nearly there is a huge benefit over starting them as soon as you can at 59 ½). While in the account, the money can continue to grow tax free. If you’re lucky enough to have a traditional pension, working longer can also increase the size of those payments.

You can delay taking Social Security

We’ve discussed this before, but everyone should have a strategy that details the best time for them to start their benefits. In general, every year you don’t take your benefits between age 62 and age 70, those benefits grow by 8 percent annually.

You may still receive company benefits

Your employer’s health insurance may be cheaper than Medicare (if you’re old enough to qualify for it) or may provide broader coverage. If your company has fewer than 20 employees you have to sign up for Medicare at age 65, but if it has 20 or more you can stay on the company plan. Then, when you are ready to stop working, you can sign up without waiting for open enrollment. You may also still receive employer contributions to your 401(k) and employer provided group life insurance.

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So, if you’re considering working “in” retirement (which is what people prefer to call it, as working “past” retirement sounds like something you have to do) here are a few suggestions.

Think broadly: Three out of five retirees enter a new line of work; they often look for jobs or careers that are more fulfilling, less stressful and more flexible. Working retirees are three times as likely as nonretirees to be entrepreneurs. Again, most aren’t starting those businesses just for financial reasons but to work on their own terms.

Prepare in advance: According to AgeWave, 5 years before retiring 37 percent of people who want to continue to work have taken steps to make it more likely that it’s possible. And two-years out, they step up their efforts. If, for example, you’re considering moving into a different field, now is the time to start networking — having coffee and lunches and teeing up the idea that you’ll be available. If you’re thinking of starting a business, this is when you do your research, put your financing in place and create a business plan. And if you’d like to continue working for your current employer in some capacity, look for an opportune time to raise the issue.

Brush up your tech skills: According to the AgeWave, Merrill Lynch research, keeping up with technology topped the list of things you can and should do to stay employable, ahead exercising, taking classes, removing old dates from your resume, coloring your hair or doing other things to appear younger.

Be flexible: By retirement age, at least some of your financial responsibilities will have tapered off. Seven out of 10 people age 65-plus have paid off their mortgages, for example. Your kids are also more likely to be on your own. This allows you to look not just at full-time work, but part time work and project-based work, as well as at opportunities that pay less than you earned in your career. Casting a wider net gives you a greater chance to land the work you want.

Consider a breather: About half of all retirees, take a break (on average of about 2 ½ years) in between their career and their next phase of work. They recharge their batteries and they discover how much they miss working, which makes them anxious to get back.. However, a downside to this is that there is the potential for some skills to fall behind, particularly in technology. You may also find that some employers are hesitant to hire people who’ve been out of work for a while. Research shows it takes older workers twice as longer to land jobs than younger ones.