Working Past 65? Three Ways to Make It Less of a Chore

You've run the calculations. You've kicked up your savings rate, opened Roth accounts, maxed out 401(k)s, and tweaked your asset allocation to allow for more long-term growth. And despite all of your efforts, you're faced with a bleak scenario: You're going to have to work longer than you had originally hoped.

It might be small consolation, but you're far from alone. Most people hurtling toward retirement today won't have the financial safety net of a pension, yet they haven't amassed enough of their own financial assets to cover their expenses once they retire. They have only one option left: working longer, provided they're able to do so. (And they might not be able to, based on some of the statistics that Morningstar's Adam Zoll shared in this article.)

Even if you don't absolutely have to work past 65, numerous studies and retirement calculators clearly illustrate the benefits of continuing to do so. Not only will you continue to collect your paycheck, but you'll also reduce the number of years you'll have to rely on your nest egg, thereby improving the odds it won't run out prematurely. Delaying Social Security past your normal retirement age also means that you'll receive a higher payout from the program.

If you fall into the "work longer" contingent, the thought of setting your alarm for 6 a.m. and packing sack lunches past age 65 might seem downright unappealing. Aren't you supposed to be spending your post-65 years spoiling your grandkids and seeing the sights you didn't have time to see when you were still working?

Maybe. But if you're still healthy and have a job, those are two pluses right there. And there are ways to make working longer more palatable, three of which I've shared below. The unifying theme among all of them is to relax and begin enjoying a happier lifestyle even as you continue to collect a paycheck.

Stop Saving
One idea for enjoying the fruits of your labors even as you continue to work comes courtesy of T. Rowe Price. The investment firm found that working longer greatly increased a person's chances of not outliving his nest egg as a result of three factors: continued income, delayed portfolio withdrawals, and a larger Social Security check. At the same time, T. Rowe found that the advantages of saving within tax-deferred accounts like a 401(k) aren't especially great for late-career savers. Yes, your money will compound tax-deferred, but the benefits of tax-deferred compounding on new investments aren't nearly as great as they were earlier in your career. Given that data set, T. Rowe asserts that a healthy compromise for many pre-retirees is to continue working but begin spending some of that cash that they had previously been earmarking for their 401(k)s. T. Rowe Price senior financial planner Christine Fahlund discussed the idea in this video.

Start Social Security for One Spouse
As part of a two-career couple, I know how much easier life is on days when one of us is off. No one has to come home to a dark house, and errands that we normally tackle on the weekends are magically completed. If both you and your spouse are still working, one option to improve both partners' quality of life is for one spouse to stop working while the other one stays on the job.

Assuming the lower-earning spouse is the first to retire, he or she could begin claiming benefits at age 62, while the higher-earning spouse delays benefits to maximize his or her benefit. I discussed Social Security maximization for married couples in this article, and the Social Security Administration's website has some extremely useful tools for modeling out various scenarios. (I've also had great luck calling the Social Security Administration when I've had specific questions about the ins and outs of the program.)

Make It a Labor of Love
If you've logged a long career within a specific field or with one company, staying put for the rest of your working years might deliver the highest financial payout. However, needing to work longer doesn't necessarily mean you have to do the same job you've always done, and staying put in a job you hate may exact a mental and physical toll even while it improves your financial well-being. Morningstar contributor Mark Miller has written extensively about encore careers--those embarked upon after age 50 that tap into a pre-retiree's desire to do a job that offers personal meaning and gratification. Such positions may not offer the same financial rewards that your old 9-to-5 job did, but if you're doing something you love, the trade-off might be worth it.

A version of this article appeared Sept. 5, 2011. 

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