Estimating your financial needs in retirement is a guessing game. The amount needed depends on many factors, including the lifestyle you desire, your health and your lifespan. Improved technology and medical advancements result in a longer and more fulfilling life for millions, with many living up to 30 years in retirement.
The downside of an extended retirement is the task of financing the unknown. Do you need one million dollars in savings, or eight to ten times your final salary? What if you reach 65 with an underfunded retirement account? For those nearing their golden years, these financial estimates could send distress signals, rather than a cause for celebration.
The truth is that the amount needed in retirement varies for everyone. You must consider, where you will live, your health, debt levels, and what you want to do after leaving the workforce. One popular option includes an encore career. Whether you want to continue earning money out of a desire to stay busy, the need to contribute, or out of financial necessity, there are many benefits to remaining active in the workforce beyond the traditional retirement at the age of 65.
What Is An Encore Career?
While we think of retirement as occurring at the age of 65, many workers are not ready to quit. In 1990, 12.1% of people 65 and older, were still working. In 2010 the percentage rose to 16.1%. As the Baby Boomer generation continues to reach the traditional retirement age, many choose to remain in the workforce. Sixty-Two percent of individuals from 45 to 60 plan to defer retirement.
An Encore Career allows seniors to remain active in their communities, follow their passions, and contribute to society. It can also provide a source of income that could improve your finances in retirement. The key difference between a job and an encore career is that the latter seeks to add more meaning to your life. To follow your passion, make a difference in the community, and to align your personal values with your work and achievements.
In some cases, you can parlay existing skills into a second career. Other times you might go in a completely different direction.
While remaining active you can aid younger generations, benefit the community, achieve personal meaning and social impact, in addition to providing income in early retirement. Common fields for an encore career include, education, environment, health, government, social service, and non-profit organizations.
Benefits of An Encore Career
With 41% of Americans ages 55 to 64 with zero savings and only 9%, exceeding $500,000 in retirement investments, additional income is a key motivator to remain in the workforce. If you must work beyond age 65, an encore career can add meaning to what you do.
Keeps the Mind Sharp
As you age, it is important to maintain both your physical and mental health. Fighting off memory loss, which plagues seniors in the form of dementia and Alzheimer’s, takes greater importance. Meaningful employment often involves problem-solving, brainstorming, and other forms of creative thinking, which can stave off memory loss and keep your mind sharp.
For many seniors, the idea of spending every day walking the beach, playing golf, or sitting on a porch swing watching the neighbors go by is not very exciting. An encore career can stimulate social engagement, reduce loneliness, and provide regular interactions with others.
Make Dreams A Reality
Your work career often focuses on providing financially for your family, receiving regular promotions and working for a lifestyle. Even if you hate the job, you dutifully work for the financial benefits. Many times, in the process, you set your passions and dreams aside to take care of your financial reality. An encore career allows you a second chance to follow your dreams. A chance to turn a hobby or interest into an income stream, without the traditional financial pressures.
Extend the Life of Your Investments
Making an additional income after traditional retirement will allow you to pay for most or all of your living expenses, without tapping into your investments. Resulting in fewer years that you need to fund with savings, thus giving you a more secure retirement.
The additional working years can also allow you to reduce debt levels and lower income needs in retirement, further extending the life of your investments. You could even use the income to contribute more money to your retirement accounts, providing an added benefit.
Each additional year of work gives investments more time to grow, reduces debt balances, and lowers your overall retirement funding needs.
Higher Social Security Payouts
An encore career can enable you to take Social Security payments later. For each year you delay benefits you can earn an additional 8% annually for the remainder of your life, which can add up to 30% higher payments than if you begin receiving benefits at your full retirement age.
Reduce Living Expenses
The Federal Reserve estimates that 50% of those 75 and older still have debt balances. Debt in retirement can deplete savings faster and increase the amount you need to cover the basics. Using an encore career as a bridge to full retirement can give you more time to lower debt balances.
Debt factors into your cost of living. You must earn enough not only to pay for today’s bills, but also to pay off yesterday’s spending. Lower debt levels result in a lower cost of living. Paying off remaining student loan balances, credit card debt, and car loans can allow you to live on less when you fully retire or your health declines.
With lower living expenses, your retirement dollars will stretch further.
Encore careers can benefit the community, while providing additional income for individuals over 50. There are many benefits to seniors who participate in employment beyond the traditional retirement age.
If you are burdened with high amounts of credit card debt and are struggling to make your payments, or you’re just not seeing your balances go down, call Timberline Financial today for a free financial analysis.
Our team of highly skilled professionals will evaluate your current situation to see if you may qualify for one of our debt relief programs. You don’t have to struggle with high-interest credit card debt any longer.