Understanding Your Wealth
INCOME EXPENSES
ASSETS LIABILITY
Income
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While the bulk of most people ’ s nest eggs are funded with retirement assets , you can supplement them with retirement income . For more people , retirement income will be generated from working , monthly Social Security benefits , a defined benefit plan like a pension , annuities , portfolio dividends or owning a business or real estate . In retirement , even modest regular income can go a long way toward reducing how quickly you need to draw down your assets .
WORK INCOME
For some , the idea of working while in retirement is a nonstarter – after all , the point of retiring is to enjoy your lifestyle without the pressures and commitment of a career . Still , there are a lot of benefits – financial and otherwise – to working in some capacity while still being retired :
• A reliable income stream . Having a regular paycheck , even if it ’ s not as large as what you earned while working , can supplement your retirement savings and decrease the need to draw down your nest egg . It might also help you delay filing for Social Security , which could result in bigger payments when you ’ re in your 70s and beyond . Given current trends for women and longevity , a larger Social Security check in their 80s and 90s could be invaluable .
• Additional contributions into a 401 ( k ) or IRA . Retirement plans typically can only be funded through earnings – the longer you work , the longer you can contribute . This can be especially important for women , who often enter retirement with a smaller nest egg than men .
• Health insurance . One of the biggest – and hardest to predict – expenses in retirement is healthcare . Many working retirees find that the health coverage is more important to them than the paycheck .
• Structure and purpose . Humans tend to be creatures of routine , and a lot of retirees struggle with the transition from a 40- hour work week to a 0-hour work week . Working even parttime gives them structure , something to do and a feeling of achievement , that they ’ re still contributing and useful members of society .
• Social interaction . Working in retirement also allows retirees to broaden their circle of friends and stay socially stimulated . This holds true for married couples and especially those who are single .
It can also give you an opportunity to start a second career . Maybe there was a business you wanted to start , but you didn ’ t have the time for during your working years – or you didn ’ t want to jeopardize your financial goals on an exciting but risky new venture . Retirement could be an ideal time to explore your interests and try something you ’ re really passionate about .
Divorce and Widowhood Unlike some of the other components of retirement funding , the decision to work in retirement is not impacted by marital status . That said , it ’ s important not to underestimate the social and structural benefits of working as a widow or divorcee . As we get older , having a support network becomes that much more critical . A recent article in Psychology , Health and Medicine found that among people aged 65 and older , social engagement – and , notably , not family relationships – was associated with better quality of life and self-rated happiness . 22