Gary McPherson, Australian music psychologist, discovered that he could predict how well a child would be able to play an instrument before their first lesson. He studied 157 students from seven years old through high school. He predicted their success by asking them this simple question, “How long do you think you’ll play your instrument?” Possible answers were: through the end of the year, through primary school, through high school, or all my life. Students who indicated a long-term commitment outperformed the others. Their success was triggered by a strong sense of purpose. 

Likewise, having a purpose can be the key to a fulfilling retirement. For some, a way of maintaining a sense of purpose may be continuing to work.  

Does your client have to work?

As their financial advisor, you’re in a good position to help your clients who are considering retirement to answer this question from a financial standpoint. Will their income sources, e.g. social security, pensions, investment income, provide enough income to satisfy their lifestyle? If not, working longer can be a solution. But make sure clients understand how working could affect their social security benefits after they've filed, and health care coverage. 
 

Clients can get a double penalty from social security

First, if they begin taking Social Security before their full retirement age, their payments will be reduced. Second, if they earn more than Social Security’s earning limits, their benefits will be reduced by $1 for every $2 they earn over the limit. They may get the second penalty back from Social Security after they reach full retirement age, but it’s a complicated formula and can take a long time.¹

How can not working affect health insurance coverage?

If your clients retire before age 65, they won’t get Medicare coverage. Most part-time jobs won’t provide health care insurance. The cost of purchasing their own health care insurance can cost tens of thousands of dollars. 

What if your client wants to work?

A 2014 EBRI (Employee Benefits Research Institute) surveyed working retirees about their reasons for working. The number one reason was that they enjoyed it (54%).² While money alone is the appeal for many to continue working past traditional retirement age, others see work as providing a sense of purpose, personal meaning, and a vital connection to the social network of people they spend more waking hours with than their family.³

If your clients want to keep working, ask them what they enjoy doing, what they’re good at, or if there’s something they've always wanted to try. Share any insights you’ve observed about what they like or don’t like about their career experience. If they’re already working, and they like their job, ask if they’ve talked with their employer about staying with them, either full- or part-time.

If your client fears they've aged out of the workplace, share these facts: 

• The 55-and-older crowd is now the only age group with a rising labor-force participation rate, even as age discrimination remains a problem for many older job seekers. Workers age 50 or older now comprise 33.4% of the U.S. labor force, up from 25% in 2002. And more than 60% of workers age 65 or older now hold full-time positions, up from 44% in 1995.⁴
• According to the nonprofit Ewing Marion Kauffman Foundation, individuals between the ages of 55 and 64 represented 24.3% of the entrepreneurs who launched businesses in 2015, up from 14.8% in 1996.⁵
  

Advantages older workers have over younger workers

Employers are constantly challenged to find skilled workers. Older workers have much more experience than younger ones and may be better prospects for employers. Employers like to fill positions that require customer contact with retirees. The reason: Older workers tend to be more patient, attentive, and better customer service providers than younger employees. The graph below conveys that, as a group, older workers are projected to show a greater percent change in employment over other age groups.

Older workers Outpace Growth Rate of Other Age Groups⁶
Civilian labor force participation rates by age group 1996 – projected 2026