You may also find that you can increase your spending rate as a result when you do begin to draw down your savings. Beginning withdrawals at a later age “enables you to create a little bit more cushion,” says David Koh, managing director, Chief Investment Office, Merrill and Bank of America Private Bank. It also allows you to pursue things you might not otherwise have done, such as getting involved in philanthropy. “And you may be able to give more to future generations,” Koh adds.
Beyond the financial benefits, of course, there are other good reasons to consider working in retirement. “For a lot of my clients, working is not just about the money,” notes Carroll. She points to one client who had been in the tech industry and became a substitute teacher. Another who loved music started working in a concert venue. “You get to do something different—something you're very passionate about,” says Carroll.
Q: Is there any downside to the extra income?
Earning income in retirement could push you into a higher tax bracket—something you’ll want to discuss with your tax professional. Once you reach age 65, a higher income can also affect your Medicare premiums.4 And if you are already claiming Social Security, as much as 85% of your Social Security income could be subject to federal (and possibly state) income taxes.5 Your financial advisor and tax professional can help you weigh these considerations. Start early. “The time to do that is 5 to 10 years before retirement,” says Kolluri.
Before accepting my buyout, I leaned heavily on my financial advisor, who assumed the roles of career counselor and psychologist, too. Now people ask me all the time, “When will you really retire?” I don’t have an answer. The truth is, I can’t imagine not working.
Rodney A. Brooks is a former deputy managing editor and personal finance and retirement columnist for USA TODAY. He is the author of two books on retirement and currently writes a retirement column for U.S. News & World Report.