The Other Retirement Plan
A retirement trend becoming more and more common is to continue to work past the normal retirement age of 65. Sometimes this can be for financial reasons, and others simply enjoy their job and would like to keep working. It is fairly clear that, in general as a society, we are staying healthier for longer, so working longer is something that is physically achievable for most. I would like to take a moment to examine this trend in our current issue of the Martens Report, to look at the benefits as well as the risks of planning to work longer. ‘Back in the day’ when 65 became the accepted age for retirement, most retirees could expect to live only a decade or so past retirement; fast forward to today and life expectancy rates are much higher. If you retire at 65, and live for another 30+ years, it might be tricky to build up a nest egg that can last this long. Due to this, even earning a small income during your retirement years can have a huge impact towards prolonging the lifespan of your money. There are some other distinct financial benefits to working longer. As long as you’re still earning, you postpone the date that you have to tap into your portfolio. Meanwhile, your retirement savings have a chance to keep growing. You may even be able to keep contributing. Although it is difficult to admit, every year you work is one year closer to your death, meaning that your (larger and still growing) investment plan will not have to stretch as far.
Working longer can be a huge benefit in theory, however, relying on this as a part of your plans comes with some risks. You may find yourself in a situation where your current employment becomes a toxic work environment, you could run into lay-offs or downsizing, or you may find you do not carry a passion for the job anymore. Some Canadians may seek a new part-time job after they retire but this too comes with some challenges: part-time work can be hard to find, it may not be challenging enough, the ‘fun job’ may only last a year or so, and when times get tough, part-timers and contract workers are usually the first to be let go. The best suggestion is to be prepared, and know your options before you make a leap back into the job market. One other risk of planning to work longer is the possibility of a health issue that could force you to stop working. Even though in general terms, Canadians are living longer and staying healthier, this does not apply to everyone. Health issues can arise at any time, and as we age, we become more susceptible to illness or disability. It is clear that there are benefits to working longer, but also risks need to be considered. My hope is that no matter what your retirement plans are, you will come to us to discuss them, so that we can help establish how they will work, and ensure you are on track to achieve them.
Andrew & Peter