Financial planners often advise prospective retirees who may not have sufficient income during retirement to plan on continuing to work after age 65. That sounds good in theory but is frankly unrealistic for most employees. The latest statistics from the Department of Labor illustrate how difficult it is to gain employment after 64. Even between ages 55 and 64, it is difficult to get a job providing income close to what you were receiving in your previous position.
According to the Bureau of Labor Statistics, the unemployment rate for individuals 55-64 was 5.4 percent, as of July, 2013. However, two thirds of individuals in the 55-64 age group who did find a new job received an average 18 percent pay cut. The re-employment rate for this group was 47 percent. For those over 64, the re-employment rate was 24 percent. Those rates were considerably lower than the group ages 20-64 (62 percent).
According to the AARP Foundation Litigation, age discrimination is another problem. Approximately 64 percent of older workers (45-74) say they have seen or experienced age discrimination in the workplace. Unfortunately, the Supreme Court in 2009 made it more difficult for seniors to sue successfully for age discrimination.
Make sure you understand your income before you retire, taking into consideration your full retirement age (FRA) for Social-Security eligibility, which is based on your year of birth. Consult this website to see a breakdown: http://www.ssa.gov/retire2/agereduction.htm.
Contact Social Security to determine your precise full retirement age. If you need to retire before that, you can initiate Social Security income as early as age 62. However, you would receive 20-30 percent less (based on your FRA).
Another key factor is health insurance. Many individuals who leave their jobs prior to age 65 find that the cost of health insurance is very high. Medicare is not available until 65, and many employers have curtailed or eliminated health insurance for retirees. Make sure you understand what your out-of-pocket health-insurance costs would be prior to age 65. Even after that age, Medicare will cover only 80 percent of your health-care costs, and a supplemental policy to cover the gap will generally cost about $200/ month.
Many individuals start businesses during retirement. Although many succeed, there is a high rate of failure for new businesses. If you are considering entrepreneurship, I suggest that you contact your local SCORE chapter. SCORE is a nationwide organization that offers low-cost seminars and free counseling to prospective and small business owners. SCORE volunteers, mostly retired, have a great deal of diverse business background and provide essential services for new business owners. I have volunteered at SCORE for over 12 years and can attest to the experience and professionalism of its volunteers.
Planning for retirement is not easy. Examine your sources of income carefully. Decide when to apply for Social Security. If you plan on retiring before 65, make sure you understand the cost of health care. Unless you have a specialized occupation that you know is age-proof, don't assume you will find work after retirement that will provide wages comparable to your pre-retirement pay. Don't assume it will be easy to start a successful business. Saving more and investing conservatively while you are working is perhaps the wisest solution.
(Elliot Raphaelson welcomes your questions and comments at email@example.com.)