The value of continuing to work in retirement
Kim Potgieter and James Carvalho swop stories about the value of continuing to work even in retirement.
James: There are a few reasons why continuing to work when you retire is a good idea, not the least of which is the contribution that you can still make to the workplace. Being kicked off a pension fund at 65 because the fund rules say you have to does not mean you no longer have value. Most people at 65 have lots of life ahead of them and have tons to offer the younger generation.
Kim: A fundamental discussion with any client approaching retirement must include the benefits of working. We are not protesting against the leisure life they’ve worked so hard to achieve; rather, we encourage them to stay involved in some form of work that is rewarding.
Our definition of work is “an engagement that brings value to others and meaning to you”.
A Retirement Confidence Survey conducted by the Employee Benefit Research Institute produced interesting results. Half of the reasons cited – including the top two – are focused on psychological and existential payoffs: firstly, staying active and, secondly, enjoying working.
Growth and health concerns were also involved in the decision to extend their work life. Money is involved but did not emerge on top. From our experience, many of our clients don’t need to continue working, but it does help with having money for extras and often delays drawing down on their retirement funds helps them last a lot longer.
James: Take Andrew, for example. He is a 65 year old man leaving a pension fund of R3
million and has saved R2,5 million in unit trust funds. His lifestyle expenses are R30,000 per month and this needs to be protected against inflation (assumed inflation is 6%) for the rest of his life.
Andrew’s planner knows that his client’s financial plan and the chosen investment strategy targets a return of inflation plus 4% for the rest of his life, and suits his life goals. Once Andrew’s plan is complete, it is evident that if he continues in his current lifestyle, his investments will run out when he is approximately 90 years old. Obviously, Andrew would love the funds to last until he blows out the 100th candle on his birthday cake …
The good news is that they can!
Click here to read the rest of this useful article.
“Just as iron rusts from disuse, even so does inaction spoil the intellect” Leonardo da Vinci.