My older siblings are often my inspiration in researching and writing about retirement.
My sister Sue, who will turn 70 next April, has been trawling for a part-time job ever since the dentist she worked for decided to retire last year.
After months of combing through ads on craigslist, she landed a great gig. Having successfully completed a series of interviews and physical exams, she will soon start a new career as a “practice patient.”
In a way, she will fulfill her lifelong dream of becoming an actor. But rather than playing for applause, she will be trying to stump newly minted doctors and medical students as she discusses her phantom symptoms.
With great pay and flexible hours, she couldn't be happier.
This is just one example of the type of creative jobs that await retirees looking to stretch their budgets or fill their time.
The value of extra income in retirement can't be overstated. Every dollar earned is one that doesn't have to be withdrawn from savings — $20,000 in income is the equivalent of a 4% annual withdrawal from a $500,000 portfolio.
And if it helps a client to delay collecting Social Security benefits until they are worth more, even better.
A new book by AARP career expert Kerry Hannon offers an in-depth look at the many job opportunities that are ideal for retirees. She also offers tips for compiling a great résumé and acing a job interview for folks who may be out of practice.
Whether one is launching a second career later in life or just interested in part-time work, the AARP's book “Great Jobs for Everyone 50+: Finding Work That Keeps You Happy and Healthy ... And Pays the Bills” (Wiley, 2012), outlines the dos and don'ts of making a job change.
There are also high-tech ways to investigate the new world of work. A new website, pivotplanet.com, allows job seekers and entrepreneurs to connect with accomplished professionals through one-on-one video and phone sessions.
The site connects people who are exploring new careers, thinking about starting a business or honing skills in hundreds of professions ranging from caterers and photographers to yoga instructors — and, yes, even financial planners. Your clients might even want to sign up at pivotplanet.com as a paid mentor.
Americans over 50 are the fastest-growing group of new business owners. For those entrepreneurial clients who are itching to turn their hobby into a money-making endeavor or who could use a few tips about launching a business after 50, direct them to bizstarters.com, founded by nationally renowned business startup coach and trainer Jeff Williams.
SOCIAL SECURITY IMPACT
Your retired clients may see part-time work as a way to fill their time or pump up their bank account, but you should remind them of the effect of earned income on their taxes and possibly their Social Security benefits.
If they are collecting Social Security benefits and are younger than 66, they may be subject to the earnings cap. That means they will lose $1 in benefits for every $2 they earn above $14,640 this year. The cap will increase to $15,120 next year.
The cap is more generous during the year a person will reach full retirement age. This year, they will lose $1 in benefits for every $3 they earn over $3,240 per month. The earning restrictions, which increase to $3,340 per month next year, disappear once a recipient turns 66.
LEVERAGE TAX RULES
For some of your older clients, working during retirement can create enormous opportunities to reduce their income taxes.
Freelancers and independent contractors can set up a solo 401(k) plan and set aside a large amount toward retirement savings. For this year, the contribution limit — which includes both elective salary deferrals and employer contributions — is $55,500 for those 50 and older. The limit will increase to $56,500 next year.
Or as long as your client is younger than 701/2 and has income from a job, he or she may want to contribute to a traditional individual retirement account as a way of scoring a tax break. Those 50 and older can contribute up to $6,000 to an IRA this year, or $6,500 next year, and deduct the contribution from their income.
And as long as they are older than 591/2, they can withdraw funds from their IRA penalty-free, though they will still owe income taxes.
If their adjustable gross income is very low (remember, the bulk of their Social Security benefits may not be taxed), they may be eligible to claim a saver's tax credit of up to $1,000 on top of the tax deduction for their IRA contribution. To be eligible for the credit this year, their adjusted gross income must fall below $57,500 for a married couple filing jointly, $43,125 for a head of household and $28,750 for a single filer.
Mary Beth Franklin (mbfranklin @investmentnews.com) welcomes your comments and suggestions for column topics. Twitter: @mbfretirepro