If you’re thinking about a career after retirement, you’re not alone.
According to a recently published survey by the American Advisors Group, a third of seniors want to work well past retirement age or, in some cases, skip retirement altogether.
While many of the respondents in AAG’s survey are motivated by financial considerations, some seniors choose to continue working after retirement due to flexible lifestyles.
However, when it comes to career planning after retirement, there are new factors that may pop up on your radar.
Are you going for a flexible work schedule? Are you prepared for the tax consequences of working after you retire? Does your current career support you by working after you retire or are you going to pursue a new career?
Here are a few considerations to keep in mind when planning your career after retirement:
1. Be clear about how much of your income qualifies for post-retirement tax
If you continue to work after retirement, you will still have to continue to pay federal income taxes. The dynamics of how your income is taxed changes as you continue to work after you retire.
While income from employment and self-employment is taxed for Medicare and income taxes, keep in mind that your Social Security benefits are also taxed.
However, if your gross income is less than the standard deduction for seniors, your tax liability may be nil.
If you do receive income or dividend from your pension or investments during retirement age, these will also be taxed.
Therefore, it may be worth talking to an accountant to get a clear picture of what your after-tax income would be if you continued to work after retirement.
2. Do you plan to stay in your current role or stand up for yourself?
Another thing you need to think about is whether you want to stay in your current career or pursue a new career after you retire.
Many seniors choose a second career after retirement. However, it does come with the need for careful planning.
For example, you may need to retrain or seek financing to start your own business.
If you plan on leaving your employer, you may need to think about turning your 401(k) over. Most people who leave an employer are given 4 options: leave their 401(k) in their current employer’s plan, roll it over into an IRA, have their 401(k) cashed out, or transfer it into their new employer’s plan employer.
If you’re planning to retire and want to maximize the tax benefits, a 401k rollover can help minimize the tax you pay on withdrawals.
This is because an IRA only allows tax-free withdrawals from age 59 1/2, while a 401k allows tax-free withdrawals from age 55.
In addition, employees who are still employed can get loans from their 401(k) to help with the costs of transitioning to a new career after retirement, such as retraining, or to pay for expenses while setting up your own business.
3. Spend Time Charting How Much Money You Should Make
The amount of money you need to earn depends a lot on the kind of lifestyle you envision for yourself in retirement.
Your retirement plans and the flexibility you require from your job will help you determine how much you should earn from your career after retirement.
If you plan to work part-time or to work flexibly after retirement, your monthly income from your career will decrease.
This requires some preparation and planning to supplement your income during retirement.
The amount you need to earn can also affect your career path after retirement, as the need to earn significant money may require you to stay in your current field to take advantage of the higher rates paid for your years of service. experience.
Whether you want to keep working for financial or professional reasons, thinking ahead about what’s involved can help you prepare and make the transition smooth.
You can decide to continue working in a career you love or start a second career act – it’s up to you.