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

Personal finance

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If you’re still working well into your 60s, odds are you’re doing so to bolster your finances.

More than 6 out of 10 people polled by Provision Living said that they’re 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 can’t afford retirement” was the top financial driver behind why these individuals continued working, followed by “I’m supporting family.”

“I’m 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 you’re aging, that comes with additional medical costs and unforeseen expenses,” said Tricia Harte, a spokesperson for Provision Living.

“One reason why they’re working past that age could be to keep those workplace benefits and keep overall costs down,” she said.

Savings shortfall

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Separately, about 30% of employees who plan to work beyond age 65 cited the need for health benefits as a reason why they’ll 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

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Here are a few things to consider if you’re 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 doesn’t apply to IRAs.

Start planning for retirement. There’s 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 you’d want to leave behind. Talk to your financial planner to get a comprehensive view.

“It’s 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.”

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