After nearly 50 years of helping run his family’s Berlin, N.H. lumber business, 70-year-old Barry Kelley was ready to retire this year.
Then came coronavirus. Now, even with his son and nephew primed to take over the 50-person firm, he’s staying put – at least for another year or two.
“You want to be there during this uncertain time,” says Kelley. “I’ve seen a lot of ups and downs.”
The coronavirus pandemic has upended millions of Americans’ career plans. And those nearing retirement age are no different. Many of those — who remain healthy enough to work — are seeing benefits to staying on the job, especially at a time of rising unemployment, low interest rates and shrunken 401(k) balances.
Amid the current economic climate, 54% of adults say they’d like to continue working in retirement, while 40% say they worry they won’t be able to retire at all, according to a 1,069-person May 2020 survey from Simplywise, a retirement income technology company.
Hard as it may be to come to terms with, staying in the workforce as long you can, especially in times like these, is usually a smart move, say experts.
“Continuing to work can be one of the best strategies to ride out a downturn,” says Mark Astrinos, a financial planner and accountant in San Francisco.
The benefits of delaying retirement
For Tina Willis, 50, an Orlando-based personal injury attorney, staying on budget meant shelving her plans for a partial retirement. This year, Willis purchased an RV and planned to spend the summer visiting national parks with her husband.
After more than 30 years on the job, the trip out west was supposed to mark the beginning of a new life phase, she says. But with business slowing, Willis is staying put in her job full time. “This pandemic has hit us financially hard, and we have a lot of uncertainty about how much our income will be affected going forward,” she says.
An extra year or two of work can translate into a lot of extra financial breathing room — especially with the stock market down, according to Astrinos. In general, turning to less risky assets such as treasury bills, money market accounts and municipal bonds can help offset volatile stocks. But selling stocks while prices are down, can lock in losses, so it makes a lot of sense to build up these assets with new savings, if you possibly can. “Try to manage your personal cash flow as much as feasible to replenish some of the [retirement] accounts,” he says.
Those in good financial standing should also consider avoiding their 401(k)’s or IRA’s required minimum distribution until the age of 72. Savers now have extra room after the age deadline was extended from 70.5 years by the SECURE Act late last year, says Paul Miller, New York-based accountant.
RMDs require those who are past retirement age to start taking out money from tax-advantaged retirement accounts. But keeping your money invested for now is another way to help avoid locking in recent losses. “With the drop in the stock market, you don’t need to take your required minimum distribution,” Miller says.
Miller also tells clients to assess both financial and personal factors when delaying retirement. Especially as social distancing directives remain in many states, earning an income while working from home can be beneficial both psychologically and financially. “Work keeps you busy – especially because the social component of your life may be on hold,” Miller says.
If you’re thinking about delaying retirement, here are other moves to keep in mind:
Earn delayed retirement credits
If you’ve reached age 66 (or slightly older depending in your birthday) and earned your full retirement age, you can notify the Social Security Administration to suspend your payments until you turn 70. (At 70, they are automatically re-instated.) Since you’re still working, waiting to get your social security payments make sense because the delay allows you to get a higher monthly payment once you start earning social security, says Miller. Delaying benefits can increase monthly payments by increase monthly payments by 8% for each suspended year. “You just need to notify Social Security that you want to suspend,” Miller says.
Take an inventory of new expenses
With new developments, many people have additional coronavirus-related expenses coming in. For instance, some would-be retirees are suddenly helping their own children pay off loans or cover their living expenses. Others are simply paying more for their own medical bills. And even smaller pandemic-related expenses for those who are retirement age, such as using pricey grocery or meal delivery services, can contribute to higher monthly bills. For some people the answer may be to push back their retirement timeline until the period of higher spending ends, Astrinos adds.
Be strategic about a second act
In some instances, Miller is seeing more people take advantage of buyouts and then jump into a second career. “Companies might give incentives to retire in the next three to nine months, so you’ll need to look for another job,” he says. Part-time employment options help keep cash coming in and may give retirement portfolios a chance to rebound, he adds. Having a fallback option for delaying retirement is even more critical as the US unemployment rate hits nearly 15 percent.