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'I can't afford retirement' is the main reason seniors say they continue to work
CNBC
Wed, 09 Oct 2019 17:13

'I can't afford retirement' is the main reason seniors say they continue to work

CNBC
Wed, 09 Oct 2019 17:13

Hero Images | Hero Images | Getty ImagesIf youre still working well into your 60s, odds are youre doing so to bolster your finances.

'I can't afford retirement' is the main reason seniors say they continue to work


More than 6 out of 10 people polled by Provision Living said that theyre working into retirement purely for financial reasons.
The company, a provider of senior living communities, surveyed 1,032 people in August. The participants were between the ages of 65 and 85, and they still worked either part-time or full-time.

"I cant afford retirement" was the top financial driver behind why these individuals continued working, followed by "Im supporting family."
"Im paying off debt" rounded out the top three financial motivations that kept older people in the workplace.

"When you have less than ideal retirement savings and youre aging, that comes with additional medical costs and unforeseen expenses," said Tricia Harte, a spokesperson for Provision Living.

"One reason why theyre working past that age could be to keep those workplace benefits and keep overall costs down," she said.
Savings shortfall
WHL | Getty Images
Separately, about 30% of employees who plan to work beyond age 65 cited the need for health benefits as a reason why theyll remain in the workplace, according to a survey from the Transamerica Center for Retirement Studies.

Remaining in the workplace can help defray the cost of health insurance, life insurance coverage and disability insurance, as employers tend to cover a portion of the expense.

Further, the underwriting for group insurance plans may be less stringent compared to the process for individual coverage.
Inching toward retirement
Marc Romanelli | Blend Images | Getty Images
Here are a few things to consider if youre not quite ready to stop working.

Know what you have saved. Take stock of all of your savings, including profit-sharing plans and employee stock ownership plans at work, said Dan Herron, CPA and principal of Elemental Wealth Advisors in San Luis Obispo, California.

You should also understand your vesting schedule for retirement plans and pensions. Vesting schedules detail the amount of time that must pass — and the requirements you must meet — in order to receive full benefits.

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What about your RMDs? Individual retirement accounts and 401(k) plans are subject to required minimum distributions after you turn age 70½. Failure to take an RMD could leave you on the hook for a 50% penalty on the amount you failed to withdraw.

The rules are a little different for people who keep working. In that case, you may be able to hold off on taking an RMD from the 401(k) plan at your current employer.

If you own 5% or more of the company, you still must take the distribution.

Also, the "still working" exception doesnt apply to IRAs.

Start planning for retirement. Theres more to retirement than just having the appropriate amount saved. You have to consider your health-care costs, long-term care needs, as well as any inheritances youd want to leave behind. Talk to your financial planner to get a comprehensive view.

"Its good to have a third-party conversation on how things look in terms of insurance, Social Security and retirement," Herron said. "You want to do it sooner rather than later."