Working Beyond Retirement Age

Just because you reach an age when many retire doesn't mean it's time for you to stop working. These days, a growing number of Americans are waiting longer to retire. In the early 1990s, the average retirement age was around 59; today it’s between 63 and 64.^{Disclosure 1}

But whether by choice or necessity, working past the typical age for retirement can offer several major benefits. "Making the conscious choice to retire when the time is best for the economy and your career can have a big impact on your finances," says Emily Guy Birken, author of The 5 Years Before You Retire. A few of those key benefits include: 

• More time to play catch-up on IRA and 401(k) contributions: the IRS caps the amount of money you can put into your retirement accounts each year. For 2021, you can contribute a maximum of $19,500 to your 401(k), and $6,000 for your IRAs. However, once you turn 50, that limit goes up to $26,000 for your 401(k) and $7,000 for your IRA. The longer you continue to work, the more time you have to take advantage of those “catch-up” contributions. 
• An opportunity to increase your monthly Social Security benefits: while you’re eligible to start claiming Social Security benefits as early as age 62, doing so permanently reduces your monthly benefit amount. Continuing to work may allow you to wait at least until full retirement age (age 66 or 67 depending on the year you were born). For every year you delay, you’ll increase your monthly payments by 8% up to age 70, when you reach the maximum benefit you can receive.
• Delay tapping into your retirement savings: delaying your retirement gives you more time to grow your savings. "Even a couple of extra years can make a big difference," says Birken. "Not only are you still building up your nest egg, you're also waiting a couple of years before you start drawing it down."

Remember to try and be flexible when it comes to determining what those last few pre-retirement years might look like. Although you may be targeting a certain age to retire, you could find yourself pushed out before you're ready. So it makes sense to prepare for the unexpected. That means building relationships with contacts you can reach out to, should you decide to pursue contract or consulting work. Also, give some thought to your career options beyond your current work situation. 

"The main thing is to not get married to any particular view of what retirement is going to be," says Birken. "The good news is we have a lot of options available to us that our parents never had."