At 65, Bonnie Miller had mixed emotions about retiring from her job as marketing director for Florida's largest credit union. She loved her job, hated the traffic, wanted to spend more time with her grandchildren, and dreamed about taking a trip to Europe to visit her daughter.

So she retired. Not in the traditional sense, though. In January, Bonnie and her husband Bruce retired from full-time employment, but not from their careers.

There's no shortage of work for this self-employed Tampa, Fla. couple. Bonnie's marketing and communications skills make her very much in demand, so much so she's had to turn work away. Bruce, a former systems analyst with expertise in fixing the Year 2000 problem, is being bombarded with assignments from technology firms. Over the past year, the Millers turned a spare bedroom into a home office, installed an extra phone line, bought two computers, and planned a two-week trip to Germany to visit family.

"I could never take two weeks vacation before," Bonnie says. "I loved my job, but there were so many other things I wanted to do. Now I have the time to do them."

Although age 65 remains for many working adults a long-awaited liberation from the nine-to-five grind, a fast-growing number of retirees like the Millers are continuing to work, though often in scaled-back jobs.

A variety of demographic and socioeconomic trends are expected to fuel the trend: longer life spans, looming shortfalls in Social Security and Medicare, and, in some cases, economic necessity. The American Association of Retired Persons (AARP) reports that 80% of the baby boomers recently surveyed say they'll keep working at least part-time during retirement.

Americans are living longer. Today, a man who reaches 65 can expect to live until 80; women until 84, according to the Social Security Administration. For many retirees, the prospect of "doing nothing" for 15 to 20 years is a bit daunting.

Tom Watson, 66, of Madison, Wis., was a veteran purchasing manager until his retirement last year. Now he works part-time at a local hardware store.

"It's nice to have the extra cash, it's something to do, and I really enjoy it," says Watson, who earns between $500 and $600 a month as a hardware clerk.

Though Watson thoroughly enjoys working, he recently cut his hours. "One morning I woke up, and I thought, heck, I don't feel retired. So I cut my schedule from five days a week to four."
      "It's nice to have
      the extra cash,
      it's something to do,
      and I enjoy it,"
      says Watson.

Earnings limits
Working in Retirement 101: Your paycheck is a double-edged sword. Earn more than the limit, and your Social Security benefits are reduced.

"People need to be aware that their earnings will affect their Social Security benefits," says Maureen Tsu, a certified financial planner based in San Juan Capistrano, Calif., and board member of the Institute of Certified Financial Planners.

The current earnings limits are:

  • If you're younger than 65, you can earn up to $9,120 with no reduction in Social Security benefits. If you earn more than that, $1 in benefits is withheld for every $2 you earn over the limit.
  • At ages 65 through 69, you can earn up to $14,500 with no reduction in Social Security benefits. If you earn more than that, $1 in benefits is withheld for every $3 you earn over the limit.
  • At age 70 and older, earnings limits no longer apply.
Here's an example of how the limits work. John Baker, 68, receives an $800 monthly Social Security benefit, or $9,600 a year. His job pays him $23,500, putting him $9,000 over the limit of $14,500. His annual benefit will be reduced by $3,000.

What's counted? Only net earnings from self-employment and wages are counted as income--not income from investments or other sources such as annuities, capital gains, or pensions. If you work for wages, income counts when you earn it, not when you're paid. If you're self-employed, income counts when you receive it, not when you earn it.

Social Security calculates benefit payments on earnings estimates provided when you apply for Social Security or from the most recent estimate of earnings annual report. Report changes in earnings to the Social Security Administration by calling 800-772-1213.

Financial considerations
Working in retirement adds a layer of complexity to retirement planning.

For example, when the Millers retired, they opted to roll their 401(k)s into IRAs (individual retirement accounts). Their rationale: They'll save on their tax bill because it's likely their income will be lower when federal law requires them to make a withdrawal at age 70½.;

If you're planning on working, you may want to take a hard look at whether or not to defer receiving your Social Security benefits. "If you know you're going to work, why elect to take the payment now and lose part of those benefits?" Tsu tells clients.

A 65-year-old worker who delays payment of Social Security benefits receives an additional 5.5% per year in benefits for each year the application is delayed. At age 70, the mandatory age at which benefits must start, that individual will receive 127.5% of the annual retirement benefit that someone would receive at age 65, according to Ron Emmons, a partner with Emmons, Hartog & Swarthout (EHS), an accounting firm based in Tulsa, Okla.

Weigh this option carefully, Emmons says. "For some people it makes sense to consider waiting, but by the same token you need to consider what you're giving up."

Consult with your tax adviser or financial planner to discuss ways to maximize your income and minimize your tax burden. For information about financial planners in your area, contact the Institute of Certified Financial Planner's Consumer Assistance Line at 800-282-7526.
      They need a
      purpose in life.
      That's more important
      than any of the
      financial issues.

New horizons
The best time to plan your perfect retirement job is while you're still working. Look around. What do you like about your job? What don't you like? For many retirees, a scaled-down version of their current job suits them just fine. Others, however, head to the nearest career exit to start something new.

Retirement can be a great opportunity to start a second career. Some things to consider: What kind of lifestyle do you envision having? Do you want to travel extensively? Is income or job satisfaction the key variable? Do you want to start your own business? What about your spouse? You'll need to come to an agreement about how you'll be spending your time. It's one thing to commit to a job; another to hook up the camper and head out to Yellowstone.

"Most of my clients who are working in retirement are doing so to have something to do," says Terry Balding, a certified financial planner based in Sun Prairie, Wis. "It's not that they need the money. They need a purpose in life. That's more important than any of the financial issues. It gives them a reason to get up in the morning."

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©1998 Credit Union National Association, Inc.