How Planning to Work in Retirement Could Backfire
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How Planning to Work in Retirement Could Backfire


While traveling and spending time with family may be the traditional golden-year activities, many young people also plan to work during retirement to substantially add to their incomes. But that strategy may not always succeed, and experts warn that workers still need to save sufficiently earlier in their careers, whatever assumptions they may have about working in their 60s and 70s.

More than seven in ten Millennials intend to keep working during retirement, according to a survey this week from Scottrade. That’s up from 56 percent of Gen Xers and 39 percent of Baby Boomers. Millennials also expect to derive a large percentage of their retirement income from working.

The survey found that Millennials who plan to work predict their work paycheck will make up nearly half (46 percent) of their retirement income, whereas Baby Boomers and Generation Xers expect income from work to make up less than a third.

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“I think people are less willing to sacrifice today in hopes for a better tomorrow,” says Kevin Reardon, president of Shakespeare Wealth Management in Pewaukee, Wisconsin. “The younger generation has seen their parent's retirement plans altered by job loss and down markets, and to some degree poor savings habits. The net result is the younger generation is understanding they will need to work in retirement.”

There are benefits to working longer, too. Studies have shown that those who work in retirement have better mental and physical health. It’s also an effective way to improve your retirement income security, says Neil Krishnaswamy, a certified financial planner with Exencial Wealth Advisors in Plano, Texas.

Those who work longer reduce how much money they need during retirement, can delay and maximize Social Security benefits and lower health insurance costs if the worker is too young to qualify for Medicare, he says.

“But it’s important to note while many people may plan to work longer, some will simply be forced to retire earlier,” Krishnaswamy says. “It is one thing to want to work and it’s another to stay employable.”

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A December study of retirees from the TransAmerica Center for Retirement Studies underscores this point. According to the study, three in ten workers retired sooner than planned. More than quarter were forced to retire because of health reasons, and another 11 percent quit working for family responsibilities. A whopping two-thirds retired for employment-related reasons, including job loss or organizational changes.

“As you age, you become a less attractive new hire,” says Avani Ramnani, director of financial planning and wealth management at Francis Financial in New York. “Companies may be inclined to fire you, and if you do have to look for another opportunity, companies may be less inclined to hire an older person.”

A survey from AARP in March 2015 found that half of the people between 45 and 70 who were unemployed in the past five years either remained unemployed or had dropped out of the job market altogether. Among those who found a job, almost half were earning less than in their previous jobs.

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Still, the job market for older workers could look markedly different 30 to 40 years from now when Millennials enter their golden years. People will likely be living longer and healthier lives, making older workers more attractive and more common.

But they shouldn’t bank on it, and they need to fund their full retirement through savings now, says Kevin J. Meehan, regional President of Wealth Enhancement Group in Itasca, Illinois.

“We therefore encourage people to create a strategy where working in retirement is an option and not a need,” he says.