Plan to Continue Working in Your Retirement Years? Make Sure You Continue Your Roth Contributions

Published on June 30, 2014

Merrill Lynch has recently conducted a study among pre-retirees over the age of 50. This study, in partnership with Age Wave produced some interesting results about baby boomers: Almost ¾ of the respondents (72 percent) stated that their ideal retirement will include working. This work might not be their current occupations—many respondents cited a desire to find new, flexible and fulfilling types and ways to work.

In addition, nearly half (47 percent) of current retirees have worked or plan to work during their retirement years (whether due to the economic downturns of the 2000s, lack of retirement savings, or other reasons). Baby boomers are redefining the notion of retirement and we will see a huge trend of older adults seeking work of some kind during those golden years.

The national survey of more than 7,000 respondents is called, “Work in Retirement: Myths and Motivations” and it explores and challenges some commonly held beliefs about work during retirement. Rather than permanently end their work life and enjoy a total-leisure lifestyle, survey participants are re-imagining retirement. After all, Americans are living longer, most employee pensions are going the way of the dodo bird, financial need among many has grown, and others see their older years as a time when they can still work, earn, and enjoy the benefits of staying active in that way.

The study also offers insights from more than 1,800 working retirees who were surveyed about their personal experiences, and includes helpful tips on how to prepare for a successful retirement career.

Retirement Phases

The study highlights modern-day realities that many pre-retirees (and retirees) are facing and talks about four phases of this retirement “workscape” as Merrill Lynch calls it:

• Pre-retirement – This phase starts five years before retiring, when 37 percent of pre-retirees who plan to work in retirement have already taken steps to prepare for their new or different career. When they get within two years of retirement, more than half of the participants have done so.
• Career intermission – Most pre-retirees take a break so they can relax a bit and retool. Among working retirees, 52 percent reported they took this break; average intermission is 2.5 years.
• Reengagement – According to the study this phase lasts nine years on average and includes a new balance of work and leisure. 83 percent of flex careerists are working part time and, compared to pre-retirees, are three times more likely to be self-employed.
• Leisure – During this fourth phase of retirement, people stop working to make more room for R&R, travel and other priorities. Working retirees in the study said they expect health challenges (77 percent) or simply not enjoying work as much (61 percent) to be the most likely causes of their permanent retirement.

Myths about retirement being a time of mental or physical decline, of a withdrawal from the world and their former lives, or that their retirement work is all about the money were overturned by the study’s findings. Rather, people are planning for and enjoying new ways to make money, new work-life balance, and engagement in life far beyond retirement age. The study also identified four types of working retirees based on their stated reasons for working. Their advice for those who want to work during retirement, 76 percent advise pre-retirees to be open to new things and 73 percent said to be willing to earn less while doing something you enjoy. Keeping up with technology was also cited as very important.

At Next Generation Trust Services, we remind all investors that keeping up with a Roth IRA is also important.

Don’t forget to fund your self-directed Roth IRA

You may continue to make contributions to your Roth IRA beyond age 70-1/2 (the contribution cutoff for Traditional IRAs is 70-1/2). Since there is no age limit for Roth IRAs (you simply need to have made reportable income for the year) you can continue to build up your self-directed retirement account as long as you are working. Your self-directed Roth IRA can make many different types of investments, including investments in alternative assets such as real estate, commodities, commercial paper, precious metals and so much more.

So our hats are off to those of you who plan to keep working—and for those who plan to keep contributing to their Roth IRAs past the age of 70-1/2, our professionals are here to answer any questions you might have about self-directed retirement plans and the many nontraditional investments they allow.

Contact us at Info@NextGenerationTrust.com or (888) 857-8058 for more information about self-directed Roth IRAs or other types of self-directed accounts, or visit our website.