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As Worker Shortage Increases, So Will
Incentives to Keep Boomers on the Job
For several years now, various agencies and academics have
predicted a systemic labor shortage that will create a labor
shortage over the next 25-30 years as the gap between Baby
Boomers and entrants of college-educated workers widens due to
the Boomers' mass retirements.
There are plenty of arguments over this theory, but employers
are acting now to keep older workers in their jobs just a little
longer. Some Boomers are finding out their bosses don't want
them to retire or are willing to make interesting compromises to
give them an incentive to stay on full- or part-time. In a
survey of older workers in the July 2008 EBRI Issue Brief,
published by the nonpartisan Employee Benefit Research Institute
(EBRI), 29 percent of workers said that feeling truly needed for
an assignment was one of the top three most effective draws for
staying on the job. Other incentives that ranked highly include:
- Receiving a full
pension while working part time;
- A pay increase;
- Continuing
company-subsidized health insurance at the same level as
full-time workers;
- Receiving a
partial pension while working part time.
So what would convince you to stay on the job or un-retire if
your employer comes calling again? It makes sense to talk over
such issues with a tax professional and a financial planner. No
matter what the incentives put in front of you, there are key
issues to consider:
Make working retirement a variable in your planning.
If you're 5-10 years away from retirement and reviewing your
retirement thinking so far, it makes sense to ask yourself under
what conditions you'd return to the workplace. You obviously
need to know based on current projections how much money you're
likely to gather from savings and other retirement resources.
Then you need to consider how much money you'd be satisfied
making in your post-retirement working life.
Consider how a return to the workplace will affect you
personally and socially. If you're 40, 50 or 60, working
right now probably feels like breathing — when have you not
worked? But it may not be the best option after a year or two
out of the workplace.
How will it affect your taxes? Tax issues shouldn't
determine your ambitions and goals, but it's important to
consider the impact work-related income will have on your
retirement. Many retirees find that it doesn't take much
post-retirement, work-related income to tip them into a higher
bracket. Look for ways to control the taxes you'll ultimately
pay, including continued participation in qualified plans, IRAs,
and other tax-favored accumulation vehicles and using annuity
income to fill the gap between the beginning of the
"post-retirement" period and the age when full Social
Security benefits can be drawn without an offset for employment
income.
Consider what earnings will do to all your retirement
payments. If you are planning to work, consider not only the
tax impact, but also how that might change the way you plan to
draw on your retirement savings and investments as well as
Social Security. If you are planning to work, it's important you
consider delaying receipt of those benefits for as long as you
can.
Look at all the incentives. The top incentives luring
experienced workers back to the workplace may be very attractive
to you, or not attractive at all. Do some thinking about this.
If you get the call, be prepared with a counterproposal of what
would really convince you to come back.
Consider insurance issues. If a retiree returning to
the workforce is already receiving Medicare or covered by a
"Medigap" policy, they may be able to lower their
costs or improve their coverage by accepting group coverage as
primary underwriter of their medical expenses. Since people over
age 55 are generally the greatest users of the healthcare
system, coverage issues are particularly important to run by a
financial expert.
Keep saving. If you return to the workplace, see what
you can do to take advantage of your new employer's 401(k) plan
or any other tax-advantaged retirement savings benefit,
particularly if an employer matches your contribution. Don't
miss a chance to enhance your retirement savings.
November 2008 — This column is produced by the Financial
Planning Association, the membership organization for the
financial planning community, and is provided by Don McCarty of
Financial Decision Partners, a local member of the FPA.
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