Jul 26, 2018

Retire Early or Continue to Work – What’s Best for You?

By United Capital

Photo credit: Getty Images

The issue of retirement is a serious one, mainly due to all the implications beyond the decision about when to leave the workforce. Some of the consequences are financial; some are personal; and some are social in nature.

Let’s define a few terms before examining this subject further:

According to the Social Security Administration, your “retirement age” is the age at which you begin to receive Social Security retirement benefits. Under the current regulations, you can begin receiving benefits at age 62 (albeit at a significantly reduced rate). However, the longer you continue to work and postpone applying for Social Security, the more your eventual monthly benefit continues to rise – all the way up to age 70.

So depending on your financial circumstances – meaning if you intend to rely heavily on Social Security income in retirement – it would make sense to continue working all the way up to age 70, so you can collect the maximum monthly amount possible.

Your “stop work age” is the age at which you leave the labor force and no longer work. There could be countless reasons why an individual might choose to stop working. There could be physical, emotional or mental distress, or issues involving a disability, or maybe they were successful in business, or managed their money wisely, and now they wish to follow their personal passions.

Whatever the reasons to stop working, there are consequences in this decision. As mentioned above, stopping work early will affect the amount an individual will receive in Social Security benefits.

If that’s not a concern, a wealthier individual will still have to make certain they have sufficient funds to last their entire lives, given they don’t intend to work anymore. That subject can give rise to a host of complicated issues, which a financial planner can help to successfully explain and implement.

The Value of Work

In addition to all the financial implications involving the issue of retirement, there is also the issue of work itself.

For some people, work defines who they are and they have difficulty conceiving of a time when they won’t be working. For others, work is simply a way to earn money, to sustain themselves and provide for their families. They might work very hard for 25-30 years and earn and save enough to enjoy a comfortable retirement. Still others are willing to sacrifice financially in order to pursue their personal passions.

The point is work means different things to different people and each person has to decide for themselves what importance work assumes in their lives. They also have to decide what their personal goals are and what kind of retirement they imagine for themselves and their spouse.

Working in Retirement

Something that has become fairly common is the phenomenon of retired people who continue to work after retirement, usually part-time. Typically what happens is a person will retire and after six months or so, they decide a life of leisure is not for them. They would rather work instead.

So pervasive is this phenomenon that there are recruiting companies that specialize in placing older and retired workers. FlexJobs is one such firm that is actively placing older folks who still desire to work. And there are several others including – SeniorJobBank, RetirementJobs.com and WorkForce50.

Senior workers are highly regarded and valued for their vast experience, their work ethic, and their willingness to mentor younger workers. For older workers, working in retirement is a way to earn a little extra money to pad their monthly income, and a way to stay active and socially engaged. It is a win-win all the way around.

Retirement is not an Age or Number

At one time, it was typical to expect that people would retire at age 65. They would hit this magic number and that’s it – they were finished in the workplace, regardless of their health, value to the company, or personal preferences.

And though some companies still insist on mandatory retirement at age 65, that perception is beginning to change. Companies are beginning to realize the value of experience and they also recognize that people in their 60s today are for more productive, active and healthier than folks from previous generations. So there now seems to be increasing flexibility on the age issue in the workplace.

At the same time, people are re-thinking what retirement means to them. Again, there was a time when people were expected to work really hard all their lives, save and invest their money wisely, and then retire to do nothing but relax or play golf.

And that’s fine but many people are deciding that they would prefer to undertake more valuable or personally meaningful activities – from active volunteering in projects all over the world, to teaching or mentoring young people, to helping when natural disasters strike, etc., or engaging in those long-held passions that were postponed in order to fulfill other responsibilities.

Instead of a specific age or number, I prefer to think of retirement as a time when you reach a point in life where your income or wealth allow you to meet your needs and obligations in order to have freedom.

The freedom to choose what your retirement will be like, and that’s a decision that each of us has to make for ourselves.

Investing involves risk and clients should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. The information contained herein is intended for information only, is not a recommendation to buy or sell any securities, and should not be considered investment advice. Please contact your financial adviser with questions about your specific needs and circumstances.

United Capital

United Capital

United Capital Financial Advisers, LLC d/b/a Goldman Sachs Personal Financial Management (“GS PFM”) is a registered investment adviser and an affiliate of Goldman Sachs & Co. LLC and subsidiary of The Goldman Sachs Group, Inc., a worldwide, full-service investment banking, broker-dealer, asset management, and financial services organization.

The information contained herein is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered investment advice. GS PFM does not provide legal, tax, or accounting advice. Clients should obtain their own independent legal, tax, or accounting advice based on their particular circumstances. Please contact your financial adviser with questions about your specific needs and circumstances.

Information and opinions expressed by individuals other than GS PFM employees do not necessarily reflect the view of GS PFM. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice.