In this month’s edition of “Money Matters,” Scott talks about some of the reasons people should consider working beyond the typical retirement age, as well as why people should not include working beyond retirement age as a critical component of their financial planning strategy.

After listening to this episode of “Money Matters,” check out this piece from Dr. Charles Chaffin, a professor at Iowa State University, who wrote, “Pfft…Retirement!” where he, too, questions the common notion that people MUST retire.

In this clip, Professor Arthur C. Brooks discusses the ways in which work can bring happiness and fulfillment:

Money Matters: Delay Retirement? The Case for Continuing to Work Transcript

0:00:00.3 Julie: WTIP is pleased to bring you another edition of Money Matters, a monthly feature intended to help us understand more about managing our finances. Scott Oeth is a certified financial planner and adjunct professor. He works with many individuals and has taught retirement planning and wealth management strategies to hundreds of financial professionals. Scott is joining us now by phone. Welcome, Scott.

0:00:29.3 Scott Oeth: Good morning, Julie.

0:00:31.5 Julie: Good morning. Thanks for being here with us today. Today, you wanted to talk about reasons why people should not retire or retire early. Why this topic?

0:00:44.0 Scott Oeth: Yeah, Julie, maybe, you know, why not retire with the emphasis on not. So, you know, it seems we can't escape this topic of retirement. There are all kinds of ads on TV for financial service products and books and blogs and, you know, you get questions from friends and family. You know, when are you going to retire? I must admit, you know, I'm a guilty party here. I've spent a large part of my career working with individuals on their own retirement plans, you know, helping them to figure out how to accumulate assets to be able to afford to retire and how to take those assets and create durable portfolios to provide, you know, lasting retirement income, many other retirement topics. I've talked to other financial professionals, and we've talked about many of these topics many times here on Money Matters on WTIP. Before we get into details, I need to keep my compliance department happy and say the standard disclosure that we're just having a general conversation, and no one should take any of this as specific advice. Do your own research and get your own professional guidance. With that said, I do think if you can do it health-wise, time-wise, well, that, you know, idyllic image of holding hands and strolling on the beach or walking through your vineyard, drinking a glass of wine in retirement is quite alluring for many people.

0:02:05.8 Scott Oeth: There's a bit of you retire and the old saying, wherever you go, there you are. It's not every day on the beach for most people. There's sort of a what now and continuing to work in retirement can bring many benefits: social, physical, emotional, and, not the least of which, financial from continuing to work in some fashion. So, I think it is worth talking about.

0:02:34.4 Julie: Well, you did touch on that financial benefit from keeping your paycheck coming in. Are there other financial benefits to continuing to work?

0:02:45.5 Scott Oeth: Definitely. The obvious one is keeping the paycheck coming in, right? Continuing to work and income stability. So, that one certainly can't be overlooked. I think it's real important, whether you're continuing to power on with your full-time job or, what I like to talk with people about is, if you're largely there, I love the idea of lifestyle by design. I think a lot of people feel like they're chained to their desk, or they're stuck there. Maybe it's just time for a change and think about what a fun job or maybe part-time work would be, giving yourself some more freedom or becoming self-employed in more of a consulting role. Even with that income stability, I think two things that are worth mentioning is one of the big risks in retirement is inflation. We've seen this over the last couple of years. You may think you have enough money, but the rising cost of living can really bite. Most jobs have somewhat of an inflation adjustment built in, and your earnings go up a bit over time with the cost of living. Something I like to map out for people is if you have a pool of assets built up in your retirement account at work or your IRA, how much could you safely withdraw out of that account over time?

0:03:58.2 Scott Oeth: There have been many studies analyzing this issue, and it's usually 4% or 5% if it's a well-designed portfolio. If you turn that around and if you were to make $25,000 a year in what would normally be your non-earning retirement years, that's the equivalent to having about $500,000 in a retirement account. That's often a real eye-opener for people when they figure out that stream of earnings, even if it feels like it's a part-time job, is significant. Now, that's not a perfect example because they're probably not going to continue to work forever, rather, maybe only a period of time, but it is something to think about. I often think with that income, maybe you're getting paid to do something that's a fun job. You'll have a client who's retired, essentially, but he spends quite a bit of time selling concessions at baseball games, and he loves it. He gets to watch the game. He gets to interact with people. You know, I went to the airport the other day, Julie, and my Uber driver was a guy of retirement age.

0:04:59.7 Scott Oeth: He had a full career in insurance. He had a business painting houses. Now, he just says he likes driving. He likes talking to people. He likes getting out, and he says it pays for his golfing and his vacations with his wife. I think some of the other big considerations that you need to think about is if you've accumulated some assets, even if you can work at a level where you cover your lifestyle largely and let those assets continue to grow, maybe getting another turn. Maybe you are really burned out in your primary job—it’s just not fun anymore—and you go to a different type of role where you can cover your cost of living and let that retirement account continue to grow for maybe another decade. That's a big, big deal. Jamie Hopkins is a guy who's a noted retirement researcher, academic, and practitioner, and he often cites that working one more year, covering your living expenses one more year, can let your retirement accounts provide two more years of retirement income on the back end.

0:06:07.8 Scott Oeth: There are two other consequences to consider. We've talked quite a bit, Julie, about Social Security on this show and delaying—you can delay up until age 70 and earn delayed earning credits—can be a big deal because your Social Security benefits allow for inflation increases, and you can get a substantial buildup. The other big one on the financial side is access to healthcare. It can be a real challenge paying out of pocket for healthcare before Medicare if you're looking at early retirement.

0:06:40.6 Julie: Very good point. You did talk about the human elements, the physical, and social. I like that, keeping active and keeping in there, knowing what's going on. Are there any risks on planning to keep working, working for a long time? Say I want to work until I'm 94-years-old. If I'm planning on that, is there anything that listeners should be aware of?

0:07:06.7 Scott Oeth: Definitely. So, like you say, lots of great reasons to continue working past retirement age: sense of purpose, reason to get up and get out of bed, personal growth. There a lot of studies about not only challenges in growing, but also possibly helping prevent cognitive decline by continuing to work. Healthy habits, regular sleep patterns, things like that, social connections. I think of the TV show, “The Office”. It's funny, and not everyone maybe would be best friends outside of work, but you can tell there's certainly a bond for those folks. The risk in thinking, well, I'm just going to keep working until age 94 doesn’t always happen for some people. Unfortunately, sadly, a lot of people are forced into retirement earlier than expected due to health reasons. So, a person’s physical health could prevent them from working past retirement, even if they wanted to continue working. I think what really makes sense for a lot of folks is to run the numbers, do the math, do the financial planning work, aim to be at a point of financial independence or at least financial independence at a baseline level and know that they’re there. Then, work becomes more optional, and maybe you can seek out those things that seem more fun, more engaging, more flexible, not full-time. The level of physical health is one of the biggest risks to continuing to work past retirement, so while I think it’s great if people can continue to work, I don’t recommend it as a financial strategy because it just may not be an option for some people.

0:08:22.2 Scott Oeth: Another risk to working past retirement age is that a lot of people are really backed into a situation where they're a caregiver, either upstream for their folks if they're still around or children or spouses, so working isn’t an option simply because they don’t have the time. Also, sadly, changes in the workplace, changes in economic needs, ageism—if we just want to throw it out there—make people less employable when they move on if their skills aren't needed or desired anymore. I'm working with one client who's not even 50-years-old yet, but his field, creative design, makes him feel like he's hit the age wall. People are not viewing him as a dynamic and creative force like they did earlier in his career. So, he's really thinking about what to do next. I think it could be a great idea to think that you'd like to work for a long time, but let's make sure you have a plan B—and probably a plan C—in case you're forced into retirement or you really need to pivot into something else that perhaps doesn't pay as much as your primary career.

0:09:28.9 Scott Oeth: I'll just throw one other thing out there, Julie. We've talked about a lot of general ideas. There's a fellow named Dr. Charles Chafin. He's a professor at Iowa State University, among other pursuits. He's one of my favorite people to follow who writes a lot about the psychology of money and behavioral finance and decision-making around money. He puts out great pieces, and one of those pieces, “Pfft…Retirement,” is a kind of dismissive look at the idea of retiring at age 65. I will link to it on my blog. He has many citations of academic journals and research around emotional, social, and physical well-being reasons around working longer.

0:10:11.3 Julie: Very interesting. We are talking with Scott Oeth. We'll be talking finances with Scott on the first Wednesday of the month, every month, on North Shore Morning. Thanks so much for joining us today, Scott.

0:10:23.2 Scott Oeth: Thank you, Julie.