- A number of your clients may want to continue working into their retirement years.
- A phased approach to retirement could be a happy medium between working and stopping altogether.
- Transitioning from full-time to part-time work in retirement impacts benefits, Social Security, and Medicare.
The timeline for when to retire is shifting. With longer life spans and advances in modern medicine, older workers are showing fewer signs of slowing down. There is little reason for people to be “put out to pasture” at a certain age when they are still physically and mentally able to work, especially if they need to keep adding to their retirement savings.
And, people still want to work, according to the nonprofit Transamerica Center for Retirement Studies® survey “What Is ‘Retirement’? Three Generations Prepare for Older Age.”
Many clients find a happy medium between fully retiring and continuing to work full-time in a phased retirement approach. We covered how to do this in another article.
If your client is ready to partially retire, now is the time to connect with them on making a plan for the transition. There are several financial areas a potential retiree needs to consider when leaving the comfort of a full-time position with benefits.
Creating a transitional plan
Look at how much money they have and need
If clients want to keep working to avoid pulling from savings or to continue adding to their savings, look at how much income they should target so they know what type of job and how many hours would cover that need. If they are phasing into retirement just to stay mentally, physically, and socially active, a high-paying role may not be as important. In that situation, they can look for a job that brings more enjoyment rather than income.
Review the benefits your client is currently receiving at their full-time job. By cutting their hours or taking a part-time job elsewhere, they may lose the benefits under their current employer.
- They may need to obtain private health insurance coverage if they are not yet 65 and enrolled in Medicare.
- Any voluntary employee benefits such as accident or hospital indemnity insurance need to be transitioned to individual plans (most will let them keep the discounted premium they had through their employer).
- Health Savings Account (HSA) contributions must stop if your client is no longer enrolled in a high-deductible health insurance plan, but the funds can be used to help pay for Medicare premiums or other qualified medical expenses.
- Their employer-sponsored, no-cost life insurance will end with their employment, so they may need to look for an individual plan that fits their budget and needs.
Make clients aware that continuing to earn a paycheck could raise their Medicare premiums. Where can they reduce income, if needed, through tax deferment or charitable giving?
If their financial strategy has been counting on Social Security, how will working impact it? Collecting Social Security and earning an income at the same time before reaching full retirement age could reduce their Social Security benefit amount, so be sure to factor that in.
Other options for creating income
If your client needs income in retirement but is having trouble job hunting or doesn’t think they can physically or mentally continue to work, remind them there are ways to generate passive income that don’t require getting a job:
- Real estate – Buying property for investment purposes or to rent out, renting a room in a home they currently own.
- Annuity – Purchasing a long-term investment issued by an insurance company designed to help protect people from outliving their income.
- Investments – Putting money into savings vehicles that yield a high interest or stocks that pay high-percentage dividends.
Knowing how your client’s financial picture will change if they want to take a phased approach to retirement will help you better advise them and keep them on track to have enough when they stop working altogether.
Share this helpful infographic with your clients: 4 Tips to Transition into Retirement.
Things to Consider:
- Know the impact on your client’s financial picture if they keep working in their retirement years.
- Leaving a full-time job means transitioning or replacing some employee benefits.
- Provide guidance on how income can affect Social Security benefits and Medicare premiums.
1 “What Is ‘Retirement’? Three Generations Prepare for Older Age,” nonprofit Transamerica Center for Retirement Studies®, April 2019
Neither Transamerica nor its agents or representatives may provide medical, tax, investment or legal advice. Anyone to whom this material is promoted, marketed, or recommended should consult with and rely on their own independent tax and legal advisors and financial professional regarding their particular situation and the concepts presented herein.
Transamerica Resources, Inc. is an Aegon company and is affiliated with various companies which include, but are not limited to, insurance companies and broker dealers. Transamerica Resources, Inc. does not offer insurance products or securities. The information provided is for educational purposes only and should not be construed as insurance, securities, tax, legal or financial advice or guidance. Please consult your personal independent advisors for answers to your specific questions.