Full retirement age is now 66 or 67, depending on the year you were born. But a recent survey revealed that one in four workers don’t plan to retire until after their 70th birthday. While some people may choose to work longer out of a desire to stay active, others may have to do so in order to keep up with their expenses. If you’re thinking about putting off your retirement, here’s a look at some of the pros and cons of working until age 70.
Pro: Working Longer May Be Good for Your Health
Getting older takes a toll on you physically. But according to one study, working longer could extend your life span. Researchers at Oregon State University found that putting retirement off for just one year after turning 65 could reduce the risk of dying by 11%.
Sticking with the 9-to-5 until age 70 doesn’t mean you’ll live forever. But it could give you more time to enjoy your golden years.
Pro: You Can Squeeze More Money Out of Social Security
With Social Security, you can get more bang for your buck by waiting until age 70 to begin drawing your benefits. If your normal retirement age is 66 but you wait until you turn 70 to start taking your Social Security benefits, you could receive 132% of the monthly amount you’re eligible for. That’s a nice financial incentive for working a little longer.
Pro: You Can Continue Growing Your Nest Egg
Working until age 70 could be a smart move if you want to add more money to your retirement fund. If you have a 401(k), for example, you could continue making contributions up to the annual limit, along with catch-up contributions while you’re employed. You could also defer triggering required minimum distributions from an employer-sponsored plan.
If you’ve got a traditional IRA, you can make new contributions until age 70 1/2. At that point, the required minimum distribution rule would kick in. With a Roth IRA, however, you have the advantage of being able to save indefinitely.
Con: Your Savings May Still Come Up Short
Continuing to earn a paycheck may help you out if you want to save more for retirement. But it may not do you any good if you end up having to spend a lot of money to counter a rising cost of living. Healthcare expenses in particular can take a big bite out of your savings.
The Bureau of Labor Statistics estimates that the average 65 to 74-year-old spends 12.2% of their income on healthcare each year. By the time they turn 75, medical expenses eat up nearly 16% of their income. At the same time, housing costs also creep up, moving from 32.4% of income in the late 60s and early 70s to almost 37% by age 75 and beyond.
Working longer also doesn’t counter the effects of inflation. When inflation rises, it has the ability to significantly erode retirement savings. According to one report, retirees can lose as much as $94,770 over the course of a 20-year period if the annual inflation rate is 2.5%.
The Bottom Line
If you’re on the fence about whether you should work until you turn 70, weighing the advantages and disadvantages of delaying your retirement can guide you toward making the decision that’s best for you. Remember that while having extra income can certainly be helpful, you’ll have less time to enjoy your retirement.
Full retirement is not as common as it used to be. Many adults now reaching retirement age are choosing to do what is termed worktirement. Put simply, instead of leaving the work force entirely, many people over 60 are choosing to continue to work, at least part time. Although this is sadly mandatory for some seniors as their Social Security and IRA or 401(k) do not provide sufficient income, for others, it is simply a great way to stay active while also providing an additional income outlet.
Because of the increase in those considering worktirement, SmartAsset recently conducted research on nearly 500 of the largest cities in the US to discover the best locations for worktirement. Within the bounds of this research, ten separate metrics were used including data from their “Best Places to Retire” study and four metrics used to gauge the job market seniors face in each city. Information concerning unemployment rates among senior seeking a job, the average annual housing costs, and the number of doctor’s offices per 1,000 residents were also examined for each city. Each city was then assigned a score from 0-100 based upon its performance across the ten metrics.
As a result, several key findings were discovered:
- South Dakota rates very high. Two of its largest cities can be found within the top ten list. This is due to the states booming job market and senior-friendly tax environment.
- America’s interior dominated the high rankings on this list. Three Texas cities fell in the top ten category (and six fell in the top 15). Additionally, like South Dakota, two Tennessee cities also made the top 10 list.
- Low taxes were a key factor in the gravitation of retirees. Many of the top cities were income-tax-free states. This could partially be due to the fact that more retirees results in the development of more infrastructure and amenities to support retirees.
- California is not the greatest place for retirees. Although this state is home to approximately 12% of the US population, high housing costs and taxes pushed them lower on the list.
Below are the top 10 cities for those considering worktirement:
- Rapid City, South Dakota
Because of its wonderful location on the eastern slopes of the Black Hills, merely miles away from Mount Rushmore, Rapid City is a draw for many tourist. However, retirees are also drawn to this area due to employment. For those wanting to continue working after retirement, Rapid City provides a variety of opportunities as the employment level is just 0.9%, the fourth lowest of the 494 cities in the study. Additionally, the effective tax rate for a retiree annually earning $42,000 is only 6.7%. There is no state income tax and sales tax of only 6%. Because of this, Rapid City has the fifth lowest effective tax rate of any major US city.
- Tyler, Texas
The Rose Capitol of the World presents appealing statistics for those working after retirement. Not only is Tyler home to the largest rose garden in America but it also has a median annual housing cost of $10,000; $3,500 less than the average home among other cities. Additionally, the unemployment rate among seniors is only 3.5%.
- Johnson City, Tennessee
Because the median annual housing rate in only $8,184, Johnson City is a great place for retirement as housing is often the biggest expense seniors face after retirement. The additional bonus of a low unemployment rate of 3.8% among seniors is another benefit to living in this beautiful city.
- Victoria, Texas
The tropical climate of this city located near the Gulf of Mexico is a wonderful retirement location for those who enjoy the sun and mild weather. However, the weather is not the only perk of Victoria. With an effective tax rate of 7.6% (includes sales and property tax) on a senior earning $42,000 annually, Victoria has the 46th lowest rate in the SmartAsset research.
- Sioux Falls, South Dakota
Returning again to South Dakota, Sioux Falls provides its senior citizens with low income taxes and a low unemployment rate of 2.2%. This ranks the city as having the 20th lowest rate among the cities researched.
- Billings, Montana
Seniors living in this city benefit greatly from one of the strongest regional economics in the country. With a 2.3% unemployment rate among senior citizens, Billings rate is the 22nd lowest in the country. Additionally, the city is known for numerous recreational opportunities. With 1.25 recreational facilities or businesses for every 1,000 residents, the city ranks in the 22nd position for having the most facilities for seniors. It is important to note however, that Montana is among the few states to tax Social Security income. Therefore, the total effective tax rate is slightly high at 12.6%
- Knoxville, Tennessee
Located near the beautiful Smokey Mountains, Knoxville not only provides seniors with a beautiful landscape but also great features for worktirement. Scoring in the top 200 in all the metrics used in this research, this city proves to have positive variables all across the scale.
- Abilene, Texas
Returning once again to Texas, we find another city which is great for those who want to continue to work after retirement. With an unemployment rate of 1.6% among senior citizens, the 7th lowest in the country, it is safe to say that almost every senior who wants to work will be able to find a job in this town.
- Roanoke, Virginia
This city is the only city east of the Appalachian to rank in the top ten. Roanoke not only provides a beautiful place to live with countless attractions all around, but also has an annual housing rate of $9,372. This is very low considering the house rate in other eastern cities (for example Washington D.C at $17,508). The unemployment rate is also below the national average at 3.9%; therefore, it will not be too difficult for senior citizens to find employment.
- Scottsdale, Arizona
Last but certainly not least is the most Western city on the top 10 list. Providing a warm climate, Scottsdale is a wonderful location for senior citizens who enjoy warm weather and a laid back culture. Out of the 5 metrics used to gauge the quality of life in each city, Scottsdale ranked in the top 50 all across the scales and ranked 11th for having a high population of people over 65 (approximately 20%).
No matter where in the country you desire to live, there are many places which are ideal for people desiring to continue to work after retirement. Not only does such a move help to provide additional financial support, but it also helps seniors stay involved with their community.