By Jilian Mincer
NEW YORK, March 7 Kathy Frederick always
assumed she would retire from her hospital administration job
when she was around 60.
But as that date neared, she realized she wasn't ready. She
was healthy, enjoyed the work and liked the paycheck. So she
decided to stick around. Now 65, Frederick works two days a week
on special projects for Scripps Health's human resources
department in San Diego.
Frederick isn't unusual. While poor health and job cuts
force many people to retire earlier than planned, a growing
number of baby boomers want to work longer than their parents
Many are healthy and want to remain active. Others are
trying to save more after the financial crisis slammed their
investments and home values. More than half of those 50 and
older surveyed in 2011 by AARP didn't think they would have
enough to live comfortably in retirement. As a result, 44.1
percent said they would like to work part time in retirement and
a third planned to delay retirement altogether.
Ideally, workers should start thinking about that decision
well before they're actually eligible for retirement. Starting a
couple of decades early might seem extreme, but it isn't.
Planning ahead gives you time to save more, switch careers, and
make the best decisions about healthcare and Social Security.
Here are a few ways to plan:
In Your 40s: This is a great time to prepare for an
eventual career change, especially if you want to switch fields
or turn a hobby into income. Try a writing class, work on a
master's degree in social work or computer programming or take
advantage of tuition reimbursement programs offered by many
large employers. Research that career that you never had and
start laying the groundwork now.
Meanwhile, keep saving. Even if you're spending more of your
cash paying college tuition right now than saving for
retirement, try to sock away as much as possible in your 401(k)
plan. The sooner you start saving, the more time those assets
have to grow -- and the more financial freedom you'll have to
chase a second career that might be less lucrative than the one
you are in now.
In your 50s: Start doing the math. Figure out how
much you'll need for retirement and get estimates of the Social
Security and pension benefits that you expect to receive. That
way you can come up with a rough guesstimate of how much you'll
need to earn in retirement, when you'll be able to retire, and
just how part time you'll be able to afford to be. That number
might change, but it's crucial to determine a realistic
It's also a good time to ramp up that second career, by
developing a business or hobby that could become
income-producing after retirement. Options include everything
from consulting to construction.
"You really should test the waters to see how much income
you can generate in a month," says Chris Fahlund, a senior
financial planner at T. Rowe Price. She says one friend has a
printmaking business that he's developing while he continues to
work his regular job. "He enjoys doing both, and it doesn't put
the same financial pressures on him."
In your 60s: Don't leave your current job without
thinking about health insurance, Social Security and your work
options. Medicare isn't available until your' re 65 and
individual private coverage could be expensive.
You can start claiming Social Security benefits at 62, but
you may not want to because early retirees face an earnings test
that could crimp those benefits. The Social Security
Administration will keep $1 in benefits for every $2 you earn
over $14,640 until you hit full retirement age. The year you
reach 66, it holds back $1 for every $3 that you earn above
Once you reach full benefit age -- currently 66 -- you can
earn as much as possible and still collect full benefits. The
longer you can wait to start benefits, the better, says Fahlund.
Waiting also means a higher benefit for your spouse.
Try finding another job before formally retiring. It may
take longer than you expected. Or sound out your current
employer to see if there's a way to transition gradually to
retirement. A growing number of businesses have programs that
enable experienced workers to remain in the workplace.
At Scripps, where Frederick works, for example, there is a
generous program that allows employees who are at least 55 and
have worked for the healthcare company for at least 10 years to
work part time while continuing to receive healthcare and
Frederick says while she likes the flexibility of working
part time, she enjoys the work and has been able to delay taking
Social Security and touching her retirement fund.
The benefits have gone beyond her bottom line. "The idea of
just retiring is not appealing," she says, noting that she feels
"revitalized" by the work she's doing now.