Employment extenders working past traditional retirement age look to employers to provide planning solutions

What does 2024 have in store for them?

Embarking on a new year brings excitement and anticipation, but there is a certain amount of anxiety associated with what is to come, as well. After all, unexpected events that can impact your financial plan are anxiety inducing because they are, well, unexpected.

Employment extenders – individuals who are working past the traditional retirement age – are looking at a shorter timeline to prepare for retirement, and these unexpected events may pose a challenge to retirement savings.

Voya Cares’ research — Employment Extenders: A (labor) force to be reckoned with — sorted employment extenders into unique groups based on their attitudes, beliefs, motivations, and behaviors to better understand their differences and meet their needs. The resulting four segments — or personas — are based primarily on their motivations for continuing to work:

• Sandy, who wants to work because she likes her job,
• Jim, who is working “Longer by Design” because it’s always been part of the plan,
• Sue, who continues to work because the thought of retirement stresses her out, and
• Janet, who still is working because she needs to; she just hasn’t saved enough for retirement.

By looking at each persona through the lens of potential unexpected events that can happen to them during 2024, we are able to get some tips and strategies, available through employers, that may help everyone prepare for retirement, whether they are planning an early retirement, retiring at age 65 or working past their traditional retirement age.

?See the fun hypothetical video illustrations and meet our employment extender personas. See if the tips provided can help you achieve a better financial future, including:

Reallocating and reinvesting Required Minimum Distributions (RMDs):

If you’re like Sue and you’re a “Want to Work”?employment extender, you may be financially prepared to retire, but still enjoy working. This year, Sue will have to start collecting required minimum distributions from the 401(k) that she has with her previous employer when she turns 72, even while she continues to work.? For those in Sue’s situation, you may want to look at how to best maximize this added taxable income stream, as you may not need this revenue for your day-to-day expenses. To reduce your taxes, you may want to gift some of your RMD to charity through a qualified charitable distribution (QCD), and the portion donated is not counted as income. Or consider enhancing your retirement savings by reallocating and reinvesting it into tax-advantaged vehicles, such as an employer retirement plan, health savings account (HSA), tax-exempt bond funds, or even 529 education funds for extended family’s college costs.

Catch-up contributions to build your nest egg more quickly:

Jim is an employment extender who is working past his traditional retirement age, and it’s all part of his plan. He shed his high-pressure corporate job, however, after several reorganizations left him feeling less satisfied with his day-to-day work. But it was never his plan to retire in his 50s, and with his wife still working, he wanted something to do. So, he got a job coaching at a local school, which gives him a relatively light schedule doing something he really enjoys. And the additional income and benefits don’t hurt, either. But he’s not sure how many season his coaching contract will be extended, so he may need to be ready to retire sooner than he plans. If you are like Jim trying to save more in less time, you may want to look at making catch-up contributions to your current employer retirement plan or own individual retirement account (IRA) to get your nest egg ready for retirement a bit earlier. Catch-up contributions also may allow you to have tax benefits while you accumulate more retirement savings towards the end of your working career.

Emergency savings accounts to help worry a little less:

Sue is an employment extender who is working past her traditional retirement age because the thought of retirement stresses her out. When her house needs a new roof, she worries that the unexpected expense could derail her retirement savings. If you’re like Sue, you may want to consider starting to save in an employer-provided emergency savings account. These employer-sponsored accounts, although not tax-advantaged, can allow you to make payroll-deducted contributions to a dedicated fund to help prepare for unexpected events, like a leaky roof, which could lead to taking a hardship withdrawal from your retirement account.

Maximizing a windfall with tax-advantaged retirement accumulation vehicles:

Janet is an employment extender who is working past her traditional retirement age because she just hasn’t saved enough. She doesn’t have a pension and her 401(k) is very little because she doesn’t have enough salary to add to it. When Janet receives a small inheritance from the death of a distant relative, she wants to understand how to get the most out of it. If you’re like Janet, you may want to consider living off your small inheritance for a while, which you’ll receive tax-free, and moving your salary into taxed-advantaged accumulation vehicles. This strategy will allow you to increase your contributions to an employer-provided retirement account and a Health Savings Account (HSA), if eligible, and both contributions are pre-tax.

The employment extenders represented here — Sandy, Jim, Sue and Janet — are hypothetical, but all of us as current and future employment extenders can use their unexpected events to gather a few tips to help better prepare for our own retirement and meet our unique needs while still working. Learn more at voyacares.com/aging.