Not all baby boomers are itching to retire. The greatest share of older Americans in more than 50 years are working well into their 60s, and it's not because they need the money.
That's according to newly released data from the Census Bureau and Bureau of Labor Statistics (BLS) analyzed by investment and financial-planning firm United Income. As of February, about 20% of Americans over age 65 — a total of 10.6 million people — are either working or looking for work, representing a 57-year high.
30 Things You Shouldn’t Hold Off Until Retirement
30 Things You Shouldn’t Hold Off Until Retirement
1. Create a Post-Retirement Budget
How much you spend in retirement might differ dramatically from what you spent during your working years. That's why pre-retirees need to create a post-retirement budget, said Emily Guy Birken, personal finance expert and author of "Choose Your Retirement."
"To do this, you will need to determine your retirement income, including how much you expect to withdraw from your investments and what you expect to receive from Social Security or a pension," she said. "Going into retirement without a post-retirement budget is a good way to overspend in your early years."
Once you have a budget set, try living on your post-retirement budget for the year leading up to retirement, said Birken. Doing so "will help you acclimate to the changes" and "psychologically transition to your post-career life," she said. It'll also give you time to figure out if you're even ready for retirement or not so you can tweak your plan before the big day comes.
3. Avoid Lifestyle Inflation
The years leading up to retirement are when your income will likely be at its highest.
"Keep your budget the same in spite of salary raises," said Pauline Paquin, owner and founder of personal finance blog Reach Financial Independence. "That will boost your retirement nest egg and allow you to live on a fraction of your last income in retirement."
4. Reduce Living Expenses
"Start streamlining your lifestyle now in preparation for retirement," said Carla Dearing, founder and CEO of online financial planning service SUM180. "Take a close look at your monthly expenses and identify those items you can do without. This gradual approach will let you significantly cut your monthly expenses without feeling the shock of adjustment."
5. Check Your Savings Numbers
"Although this sounds like a no-brainer, it makes sense to double, triple and quadruple-check [your retirement numbers] before you abandon the safety net of a regular paycheck," said Robert Steen, enterprise advice director for retirement at USAA. "We recommend having roughly 10 to 12 times your final salary saved up before you start your retirement."
6. Identify Income Sources
Review and list guaranteed income sources — like Social Security, pensions and existing annuities — as well as income-generating investments such as IRAs, 401ks, taxable investment accounts and savings accounts, to get ready for retirement.
"If you have any doubts about your ability to cover any of your retirement expenses, or legacy goals, get some expert help," said Steen. "A financial advisor can provide additional perspective, advice and solutions to help you reach your retirement goals."
7. Plan Your Second Act
Some retirees pursue a passion project, while others seek a little extra income on the side to make ends meet. Dearing recommends using your last year of employment to plan for your post-retirement career.
"Build the skills, resources and professional network you'll need to earn additional income after you leave your current job," she said.
8. Coordinate Timing With Your Partner
"It is fun to think of retiring together and immediately embarking on your elaborate travel plans, but if you stagger your retirement, more of your retirement assets will stay invested," said Dearing. "You'll also have the continued benefits from one of your employers; the medical coverage alone might have a significant impact."
9. Boost Retirement Savings
"It can be difficult for many people to max out their retirement accounts throughout their working lives. But during your last year, strive to sock away as much as possible," said David Hryck, personal finance expert and partner with New York City tax law firm Reed Smith. Your last working year is the final opportunity to put away as much as possible and pad your retirement savings account.
10. Take Advantage of Catch-Up Provisions
"The government encourages saving in the final years leading up to retirement by allowing catch-up contributions to retirement accounts," said Daniel Zajac, partner with Simone Zajac Wealth Management Group. For people 50 years of age and older, the IRS allows a pre-tax deferral of $24,500 into an employer-sponsored retirement plan.
IRA participants age 50 and older who meet income requirements can also contribute an extra $1,000 per year. "I've never heard a retiree complain that they saved too much for retirement," Zajac said.
11. Consolidate Financial Accounts
It's easier to keep track of your investment income if your accounts are in as few places as possible. Hryck suggests consolidating financial accounts to simplify record-keeping and achieve easier cash flow tracking as you get ready for retirement.
However, he warns individuals to "consider the consequences from a tax perspective prior to making any moves, such as selling stocks or mutual funds."
12. Reduce Your Portfolio’s Risk Profile
"The worst time to take a negative in your portfolio is right before retirement," said Tom Till, financial professional and owner of APPS Financial Group, which helps families and individuals with financial planning. "It will directly affect how much you can live on during retirement."
Contact a financial planner or take an online survey to determine your risk tolerance and adjust your portfolio accordingly. "I have seen people have to work an extra two to four years because they failed to take this step when close to retirement," Till said.
13. Create a Distribution Strategy
The accumulation and distribution of assets require two entirely different strategies and, particularly for those with a long retirement horizon, there will likely be a need for simultaneous accumulation and distribution plans.
"It is key to work with someone who is knowledgeable about distribution in this phase of life," said Till. Distribute too much or earn too little, and you risk not having enough capital to make it through retirement.
"Credit card debt can carry an interest rate of up to 20 percent," said Till. "Student loan debt never goes away, and the government can choose to withhold your Social Security benefits if you have outstanding student loans."
15. Relocate for Retirement
If you're planning to retire elsewhere, Benjamin Sullivan, a certified financial planner with Palisades Hudson Financial Group in Scarsdale, N.Y., suggests moving or buying a second home while still employed.
"While many retirees can qualify for a mortgage, it's much easier to prove you have the income to support a mortgage if you make the move while still earning a full salary," he said.
16. Work Extra Hours
"Some pensions and severance payments are calculated based on the income you earn in your last few working years before retirement," said Sullivan. "Therefore, working additional hours or taking on additional projects in your final working years can give you extra income now and in the future."
In other words, a little extra hard work now can create a substantial payoff once you transition out of the workforce.
"Lack of adequate insurance coverage can lead to high unexpected costs that might cause you to go into debt," said Harrine Freeman, financial expert and CEO of H.E. Freeman Enterprises. The majority of bankruptcies result from an unexpected, expensive medical concern. Long-term care insurance can help defray the high costs associated with an unforeseen ailment or potentially needing long-term care.
18. Refinance or Pay Off Your Mortgage
"The thing you absolutely must do is straighten out your mortgage financing before retiring because you might not qualify with your reduced income after retirement," said Casey Fleming, author of "The Loan Guide: How to Get the Best Possible Mortgage." "If you don't do this, you might find yourself with too high an interest rate that you can't get rid of, too high a payment for your new, lower income or plenty of equity but no way to access it readily."
19. Declutter Your House and Mind
"Clearing our mental clutter is an essential step to getting ready for the next chapter in our lives, which often includes getting rid of stuff," said Catherine Allen, co-author of "The Retirement Boom: An All-Inclusive Guide to Money, Life and Health in Your Next Chapter."
Not only are these items unlikely to be worth as much as you think, but the odds are also good that your family members won't hang on to them.
"Our kids and grandkids are minimalists and don't want to save Aunt Hattie's china or Grandpa Paul's stamp collection," she said.
20. Know How Your Income Affects Your Taxes
"When an individual's 'combined income' — defined as half your Social Security benefit, plus your other adjusted gross income — exceeds $25,000 as a single person, your benefit becomes taxable," said personal finance writer JoeTaxpayer. "Simply put, the tax burden on $30,000 of Social Security benefits and $20,000 from retirement funds will be far less than if the two were reversed."
"For each year you delay benefits past age 62, you gain a 6 percent to 8 percent increase in lifetime annual benefits. That adds up quickly," Steen said. You can check your personal Social Security benefits at SSA.gov.
22. Engage in Your Interests and Hobbies
Many pre-retirees forget to account for how they'll spend their time once they're no longer headed to the office each day. "Chart out your time both at the macro-level (annual vacations, trips, etc.) and at the daily level — what will you do immediately after waking up?" said Paula Pant, personal finance blogger and founder of Afford Anything.
If you fail to plan ahead for retirement hobbies, "you'll develop restlessness, spend too much money out of boredom and potentially jump back into the workforce due to a lack of anything else to do," she said.
23. Apply for a Reduced Real Property Tax Program
"Many of the elderly lose their homes due to the inability to pay their real property taxes and in some cases, the amount owed is less than $1,000," said Freeman. "Owing taxes during retirement will reduce your monthly cash flow and might put you in a financial bind that could take months to recover from."
"Home repairs can range from hundreds to thousands of dollars per repair, and might lead to usage of credit cards if you cannot afford to pay for the repairs on your fixed income," said Freeman. An up-to-date home warranty can cover many unexpected repair costs, which can help keep a retiree from busting the budget.
25. Build an Ultra-Emergency Savings Account
"The standard advice for emergency savings accounts is to have six to 12 months' worth of living expenses. However, if you plan to no longer have earned income, increase your emergency savings to 18 to 24 months' worth," said David Auten and John Schneider of The Debt Free Guys blog.
"For the 12 months leading into retirement, cut your expenses and put all additional savings into your ultra-emergency savings account," they added. That way, it can help keep invested assets secure, if and when an unexpected financial emergency occurs.
26. Review Family Financial Obligations
An emotional drive to help loved ones financially can erode a nest egg.
"Helping out family and friends is great, but don't do it at the expense of your retirement savings," said Steen. "Outliving your resources is a real risk. So, even if you think you have the cash available, seek professional advice before making a decision."
27. Review Life Insurance Coverage
When you retire, you might lose the group life insurance coverage offered through your employer.
If you "still have financial obligations such as dependent children, a mortgage or a car loan, consider buying a private life insurance policy if you're entering retirement with debt, or if you would lose benefits if you or your partner dies," said Steen.
28. Consider Healthcare Coverage
"Knowing exactly what to expect from your healthcare benefits is vital for retirees," said Birken. Fidelity has calculated that a 65-year-old retiring couple will need $275,000 for healthcare over the span of their retirement.
The first step she recommends is a meeting with your human resources department to find out if you're one of the lucky few who will receive employer-covered healthcare during retirement. If not, find out when your health benefits will lapse in retirement and, if you're under age 65 when you retire, you'll need to do to sign up for COBRA.
29. Get Organized
Organization doesn't just make your life easier in retirement; it also ensures loved ones can easily find key documents in case of an emergency and if you're unable to access them yourself.
"Compile critical information in a safe place, such as a fire safe," said Allen. "Keep paper copies of important documents, in case you lose the electronic."
You should also make a list of all your online accounts and passwords, such as your bank and investment accounts, so your family can easily find this information when the time comes.
30. Check Your Emotional Readiness
"Just because 'everyone' retires at age 65 doesn't mean you have to do the same," said Steen. Before leaving your career, ask yourself if you're retiring because it's something you look forward to or because it's something you expected to do at a particular age milestone.
If you're constantly asking yourself, "Am I ready to retire?" and never pulling the trigger, you might want to hold off on quitting your day job.
"If you are very unsure of the decision to retire, and have a choice, then don't do it," said Steen. "Working longer, perhaps at something new and different, can help you maintain yourself, both financially and mentally."
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Today's over-65 population includes baby boomers, defined by Pew Research as ages 55 to 73, and the silent generation, ages 73 and up. The data do not show the specific age breakdown of retirement-age workers.
The full retirement age for Americans born before 1960, which includes millions of baby boomers, is 66 and 10 months; that's the age they're entitled to full Social Security benefits. People can begin claiming a reduced Social Security benefit at age 62, or delay their benefit beyond full retirement age to increase their monthly payout by up to 8% per year, maxing out at age 70.
The notable increase in retirement-age workers could be explained, in part, by the shift away from workplace pensions and toward defined contribution plans, like 401(k)s, Lincoln Plews, a research analyst at United Income, told Business Insider.
In these types of plans, most of the contributions come from the worker rather than the employer, and Americans are notoriously bad at saving money. It's fair to conclude, then, that some people may need to work longer to make up for a lack of savings come retirement age. And yet, Plews said, the data show scant savings isn't what is driving most old-age workers.
"If you break the data down by education, the largest increase in working past the age of 65 has been seen among those who are in the best shape for retirement, highly educated people with high incomes," Plews told Business Insider. "According to the Federal Reserve's 2016 Survey of Consumer Finances, people with a college degree still working past age 65 have a median net worth of $706,000. For those in this group with an above-average income, the median is just over $1.4 million."
Plews found that the share of over-65 workers with at least a college degree increased from 25% in 1985 to 53% in 2019, bumping up the average income for retirement-age workers from $48,000 to $78,000, after adjusting for inflation.
Further, the numbers show there's another, more intangible, factor at play: longevity.
"Retirement-age Americans are feeling healthier than ever. More than three out of four Americans aged 65 or older report being in good, very good, or excellent health, and this proportion has grown steadily over the past 35 years," Plews wrote in the United Income report.
Improved health means Americans are feeling more capable than ever, the report found. Seventy-seven percent of over-65 workers said there are no limitations in the kind of work they can do.