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How Can You Have a “Second Act” in Retirement?

Apr 17, 2020

Thinking of launching your next career after you retire? You’re not alone. The phenomenon has become so common that it’s inspired its own name – the “second act.”

Over the past three decades, the amount of people working past age 65 has doubled. Nearly 20 percent of adults over age 65 work in some capacity. By 2024, the Bureau of Labor Statistics expects 13 million people in that age group to be in the workforce.1

Some of those individuals are working because they need to financially. However, others are doing it because they’re simply not ready to retire, at least in the traditional sense. Fidelity estimates that the average 65-year-old man will live to age 87, and the average woman will live to 89. That’s more than two decades in retirement for many people, which could be plenty of time to have a fulfilling second career.2

In order to launch a successful second act, though, you’ll need to have a stable financial foundation. Below are a few tips to make sure you’re on solid ground before you start the next chapter:

Take care of healthcare.

Often in a second act, the reward is personal fulfillment, not necessarily financial compensation. While you may get compensated for your time, it’s possible that your new career may not come with benefits like health insurance.

Fortunately, if you prepare in advance, you may not need health insurance from your new pursuit. Start by estimating your healthcare needs. You become eligible for Medicare at age 65. However, there are many different types of Medicare options, especially in Medicare Advantage. As you approach retirement, start exploring the different options and find the one that best aligns with your budget.

Also, consider out-of-pocket expenses. Many services and treatments aren’t covered by Medicare. Even those that are covered often require copays and deductibles. Fidelity estimates that the average 65-year-old couple will spend $285,000 out-of-pocket in retirement.3

You can prepare for health care costs by putting away money today. One effective way to do so is with a health savings account (HSA). You can make tax-deductible contributions to an HSA and then allocate the funds according to your needs and goals. All growth is tax-deferred, and withdrawals for medical expenses are tax-free. By having a solid healthcare plan in place, you can give yourself the freedom to find the role that is most fulfilling for you rather than the one that provides the best healthcare.

Guarantee your income.

Again, this is about having the flexibility to find the role that is right for you without having to worry about financial issues. If you have sufficient income in retirement, you can focus on charting the path you want.

You’ll likely get Social Security in retirement. Maybe you even have a defined benefit pension or other income sources. You also may have to rely on your savings to generate income.

However, there are risks associated with taking retirement income from your savings. What if you live longer than expected and run out of money? What if the market suffers a downturn and threatens your retirement income?

One way to minimize these risks is to create a guaranteed stream of income. You can use financial vehicles like an annuity to create additional sources of lifetime income, which could reduce risk and uncertainty in retirement. That certainty could give you the flexibility you need to pursue your second act.

Ready to prepare for your second act? Let’s talk about it. Contact us today at Protecting Your Retirement LLC. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation. Our Telephone number is 913-648-2700.

1https://www.aarp.org/work/employers/info-2019/americans-working-past-65.html

2https://www.fidelity.com/viewpoints/retirement/longevity

3https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/press-release/healthcare-price-check-040219.pdf

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