With inflation soaring and fears of a looming recession, people may be considering working past retirement age to make up for any shortfall in savings. Well over half (70%) of workers expect to work to some degree in retirement, according to the latest Retirement Confidence Survey from the Employee Benefits Research Institute (EBRI). ). However, the same study found that only 27% of retirees are currently working.
The study surveyed 2,677 Americans aged 25 and older. The group included 1,545 workers and 1,132 retirees.
Of all workers surveyed, 34% said they expect to work part-time in retirement, but only 16% do. Additionally, 19% of workers said they expect to work in seasonal or sporadic jobs throughout the year, compared to only 7% of retirees currently doing so. And for those willing to go the extra mile, the numbers are slimmer: 3% of workers say they intend to work both full-time and part-time, according to the survey. However, only 2% of retirees do so today.
While rising prices may have added additional urgency to workers’ plans to continue earning a living, EBRI’s annual survey has consistently found a wide gap between those planning to work for pay in retirement and those who actually do.
Several factors may be behind this withdrawal from the paid workforce, including health issues, caregiving responsibilities, and age discrimination in the workplace. It’s best not to rely on the ability to work as long as you want, which makes maximizing your savings all the more vital today.
How to increase savings now
A major hurdle you may face in retirement is rising health care costs. Brent Bruggink, Director of Pension Services at CG Financial Services, recommends that eligible individuals open a Health Savings Account (HSA). Many people with high-deductible health insurance plans can open HSAs through their employers or through financial services institutions such as banks.
An HSA helps you save for retirement while providing you with special tax benefits. For example, money grows tax-free, and you can withdraw money from your HSA to fund eligible healthcare expenses tax-free. And if you’re at least 65, you can use the money for anything without incurring a tax penalty (although you’ll owe regular income taxes if you withdraw HSA funds to pay for ineligible expenses).
And if you can, try to maximize your IRA or 401(k). If you’re at least 50, you can take advantage of so-called catch-up contributions and divert a maximum of $7,000 to your IRA and $27,000 to your 401(k) in 2022.
“Consider areas where you can cut expenses and redirect that money to investments for retirement,” Bruggink says. “If there are areas where a reduction in spending is appropriate, these funds can be used to take advantage of catch-up contributions, for example, and help scale up investment efforts for retirement.”
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