How Working Past 65 Changes Financial Planning

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A 2018 Gallup poll showed 41% of Americans won’t retire until after age 65. This is nearly double the 21% of Americans who expected to retire before 65 in 2002.

Seniors are going into what would normally be retirement years, but they aren’t able to retire or don’t want to. Many workers expect to continue working past 65 because they don’t feel financially secure. They are postponing retirement to supplement their savings and Social Security. Health care costs are another concern for maturing workers.[1]

Other seniors work after retirement age because they want to keep busy and stay mentally active. Whatever the case, those retiring after the traditional retirement age have different financial planning considerations. Government benefit plans including Social Security and Medicare, for example, have an impact on seniors whether or not they use them.

Here are four financial planning areas to consider if you’re planning to work past age 65:

Social Security

You may choose to begin receiving Social Security benefits at the age of 62, but the value of your benefits goes up each year you delay Social Security until reaching the maximum age of 70. For example, a retiree who chooses to begin receiving Social Security at the age of 62 may receive $725 a month. If that same retiree had waited until they turned 70 then their monthly benefit could be $1,280.[2]

Before deciding whether to take this government benefit while working, it’s a good idea to look at your cash outflow. That means considering whether you’re putting a lot of charges on credit cards and spending unnecessarily in other ways.

For more information on the role Social Security should play in your retirement income, check out this guide to utilizing Social Security to the fullest or consult your financial advisor.


While you may be covered under your employer’s health plan, you shouldn’t ignore Medicare. People who are working still need to be aware that there are substantial penalties if you don’t sign up for Medicare by age 65, even if you’re staying on your employer’s health plan.

When you sign up for Medicare, you are signing up for part B, which includes outpatient care and preventative services, as well as part D, the prescription drug benefit. You don’t have to tap into the benefits right away, but you’ll get billed for the premium. You can still use your employer-provided healthcare for primary coverage.

For most people, though, it makes sense to use Medicare as primary insurance, and employer coverage as backup, especially since employer coverage may pick up coinsurance and deductibles.

You’ll be hit with a 10% penalty for every year you don’t sign up for Medicare after age 65, and that penalty stays with you. That means you’ll pay 20% more at age 67, which is an ongoing penalty.[3]

Why does Medicare do this? The government wants to know what its costs will be. It’s part of the government budgeting and allocation process.

Consolidating accounts

Chances are that if you’ve kept working this long, you’ve got a good amount of money invested in a company retirement plan. You’ll need to decide what to do with this money when you retire. Having the assistance of a financial advisor can be helpful here. A trusted professional can help you choose the right financial institution to suit your needs and help make managing your retirement savings much easier.

Retirement account withdrawals

Once you are 70 ½, withdrawals are usually required from your 401K, IRA, SIMPLE IRA, SEP or other defined retirement plans (Roth IRA withdrawals are not required until the owner’s death). These withdrawals will be considered taxable income, so seniors who are still working need to take these distributions into consideration when planning for taxes. Failure to take these withdrawals may increase the taxes owed on the distribution amount.[4]

Consider a financial advisor

Retiring later in life can change the way you need to manage your retirement goals. Therefore, if you’re planning to work past age 65, consider consulting with a financial professional. This way, you can rely on someone to help make sure your bases are covered.