3 Ways to Retire: Financial Advisor in Santa Rosa, CA Looks at Each

3 Ways to Retire: Financial Advisor in Santa Rosa, CA Looks at Each

Doesn’t retiring mean, well, retiring? No longer working? The end of the work road?

Not necessarily.

A study from the U.S. Census Bureau and the Bureau of Labor Statistics (BLS) shows that semi-retired life is on the rise. One in every five retirees age 65 or older is still working or looking for work in retirement – and this number is expected to increase through 2024.

Whether it’s out of necessity or because you’re just not ready to stop working completely, the transition to retirement looks different for everyone. As a financial advisor in Santa Rosa, CA for many years, in my experience, there are 3 main ways to retire: Full-time, part-time, or as your own boss. (COVID-19 may have changed your initial plans.)

Whatever retirement looks like for you, we can help. Whichever route you take, it’s important to know what each scenario looks like. There are benefits and drawbacks to each of the above options. If you have a question that’s not addressed here, let’s talk!

 

It’s never too early to start planning for the future. Schedule a no-obligation conversation with the team at Montgomery Taylor Wealth Management to see how we can help.

 

Retiring Full-Time

Retiring full-time is pretty self-explanatory. Hopefully, you’ve met with your financial advisor to determine your needs, both financially and mentally, and have a plan for withdrawal, taxes and inflation.

In light of COVID-19, some people are still able to retire in a full-time capacity, but it may just be a few years later than they had originally planned. You may start retirement, but still continue working full-time for a bit longer. This can look two different ways: You could either stay in your current job or look for a new career opportunity. For example, if you’re retiring from corporate America but have always wanted to get into non-profits, retirement could be a good way to try out a new career field in a low-stakes way.

If you’ve retired but will continue working a bit longer, here are a few considerations you don’t want to overlook:

Benefits: 

  • Working longer can result in a higher monthly benefit amount for Social Security if you’re able to delay benefits until closer to age 70.
  • You may have the option of delaying Required Minimum Distributions (RMDs) from your 401(k) if you’re still with the same employer.
  • You may have access to cheaper healthcare coverage through your employer.
  • Working longer gives you the opportunity to continue to have a steady income, which can help stretch your savings.

Drawbacks:

  • Working full-time could bump you into a higher tax bracket.
  • The amount you receive in Social Security benefits may be affected if you’re claiming while working, haven’t yet reached full retirement age, and make more than $18,960 a year in 2021.
  • You may have to pay taxes on Social Security benefits if you’re claiming while working and make more than $25,000 a year as a single filer or $32,000 as a married person filing jointly

This blog post may help: Working After Retirement: 3 Ways to Do It and How It May Impact Your Benefits.

Working Part-Time in Retirement

There are many different ways to work part-time in retirement. For example, you could:

  • Change your hours at your current job
  • Find part-time work doing something low-stress
  • Do a phased retirement where you adjust to part-time work at first, then fully retire a few years after that

If deciding to work part-time in retirement, here are a few things to keep in mind:

Benefits: 

  • Working part-time can help you ease into retirement.
  • This scenario can give you a better work-life balance than working full-time.
  • You can adjust to a part-time salary before transitioning to having no salary at all.
  • You may be eligible for healthcare benefits if you don’t qualify for Medicare yet.
  • You may be able to hold off on having to use your savings right away.
  • You may have a higher monthly benefit amount for Social Security, if you’re able to delay until closer to age 70.

Drawbacks:

  • Many companies don’t offer health insurance coverage to part-time employees (although some do).
  • Working part-time could bump you into a higher tax bracket.
  • Working in any capacity could reduce your Social Security benefit amount if you’re claiming while working, haven’t yet reached full retirement age, and make more than $18,960 a year in 2021
  • You may have to pay taxes on Social Security benefits if you’re claiming while working and make more than $25,000 a year as a single filer or $32,000 as a married person filing jointly

This blog post may help: How Much Will My Social Security Benefits Be? Sonoma County Wealth Advisor Explains.

Starting Your Own Business in Retirement

Have you been toying with the idea of working for yourself someday? Well, that “someday” could be retirement.

For many Americans, retirement is the perfect opportunity to turn your passions into a business that keeps you fueled, focused and fulfilled.

Whatever you do, talk to a financial advisor first! There may be start-up costs you didn’t think about, and the last thing you want to do is get to retirement, drain your savings trying to get an idea off the ground, and then run out of money when you need it most.

You’ll also want to discuss:

Benefits: 

  • Starting your business can allow you to earn extra money doing something you love.
  • It can also provide a higher monthly benefit amount for Social Security if you’re able to delay taking benefits until closer to age 70.

Drawbacks:

  • Startup costs could drain your nest egg if you’re not careful.
  • You may be responsible for health coverage if you don’t yet qualify for Medicare.
  • A new business could bump you into a higher tax bracket.
  • Your Social Security benefit amount could be reduced if you haven’t yet reached full retirement age, and make more than $18,960 a year in 2021.
  • You could pay taxes on Social Security benefits if you make more than $25,000 a year as a single filer or $32,000 as a married person filing jointly

This blog post may help: Dangerous Assumptions Business Owners Make About Retirement.

The Bottom Line

Working in retirement can be a great option for those who want to stay active and engaged, have access to employer-sponsored healthcare benefits, and bring in supplemental income. That said, it could negatively impact your taxes and Social Security benefits, so talk to a financial advisor to fully walk-through your options before making a decision.

If you need help figuring out if you should work in retirement, let’s talk. Our experienced financial advisors in Santa Rosa, CA specialize in helping high-net-worth pre-retirees in Northern California and can help you figure out how working in retirement could impact your benefits and increase the longevity of your savings.

Montgomery Taylor Realistic Financial Planning