Prepare Today To Help Avoid Working in Retirement Tomorrow

For some people, continuing to work in retirement is a preference — they love what they do. For others, it’s driven by the uncertainty of not knowing whether they have saved enough.

In fact, only 57% of Americans ages 55 to 64 have retirement accounts. This means many are nearing retirement without dedicated savings.⁶ If you are nearing retirement, taking the time to review your financial picture can help build confidence about your next chapter.

According to a recent survey, over three quarters of retirees say they can afford to spend freely, but nearly half say they still spend less because they fear they’ll run out of money.⁷ The findings underscore how fear of outliving savings can shape spending decisions throughout retirement.

Expenses can add up quickly in retirement. Costs like commuting and retirement contributions may go away, but other costs, like healthcare and travel, are likely to increase. The good news is that you can address these concerns in several ways.

Calculate your living expenses and healthcare costs

To plan future expenses, track current spending. List every dollar you spend on daily needs, from transportation to food. If you don’t have the time for this kind of detailed work, you can make a broad estimate.

Add up all your income. Then see how much you usually have left at the end of each month. This difference is your average monthly spending need.

Healthcare expenses are a significant priority. One strategy that can help you prepare is using a health savings account (HSA). For 2026, the IRS limits for HSA savings are $4,400 for self-only coverage and $8,750 for family coverage.

Those age 55 and older who have not enrolled in Medicare can contribute an extra $1,000 as a catch-up contribution. For more information, read HSA and Medicare: How to Make the Most of Both.

Keep this in mind: If you spend HSA funds on nonmedical expenses before age 65, you may owe income tax. You may also pay a 20% penalty. After age 65, you can withdraw money without a penalty, but you may need to report it as taxable income. HSA contributions are exempt from federal income tax, but they’re not exempt from taxation in certain states.

Establish income stability

According to a recent survey, 91% of retirees rely on Social Security for income, and 53% cite it as their primary source.⁹ After the 2026 Social Security cost-of-living adjustment (COLA) of 2.8%, the average retired worker’s Social Security benefit is about $2,071 per month.¹⁰

When strategizing income stability, consider having diverse sources that can provide for your future. Income can come from retirement accounts, pensions, part-time work, and Social Security benefits. Tally all the income you expect to receive and determine which sources may keep pace with inflation.

Manage debt strategically

Debt can play a role in any financial strategy, but understanding the benefits and limitations is critical. While people often link student debt to younger workers, over 3.5 million Americans age 60 and older carry it.¹¹

Together, they owe more than $125 billion. In many cases, this debt isn’t from loans for their own education but from Parent PLUS loans taken out to help children or grandchildren attend college. Others remain responsible for private student loans they cosigned years earlier.¹²

We recommend paying down your debt before you retire. Rank each debt by size and then start paying the debts that have the highest interest rate. Learn how to manage debt to reach your full potential.

Other possible solutions include combining high-interest debt into a personal loan with a lower rate. You could also delay retirement to pay off remaining debt. If you are at retirement age, you may consider using your retirement funds to pay off debt with higher interest rates, but be aware of potential penalties.

Build retirement savings before you retire

No single answer exists for how much money Americans need to retire comfortably. One recent survey suggests workers believe they need $1.26 million, so the years right before retirement can be critical. ¹³ Contributions and investment growth can have a big impact on long-term financial security. Increasing 401(k) contributions, taking full advantage of employer matching programs, and using catch-up contributions that are available to workers age 50 and older can help accelerate savings. Traditional and Roth IRAs may provide additional tax advantages to those who qualify.

Some retirees also consider guaranteed-income products, such as annuities, to supplement Social Security and help address longevity risk. Other tools, including HSAs, can provide tax-advantaged funds for future healthcare expenses. For individuals with estate planning goals, life insurance policies may offer additional financial flexibility.

Nonfinancial benefits of working in retirement

Whether work in retirement is a financial need or a personal choice, it can offer real benefits. These benefits go beyond income and include:

• Cognitive stimulation. Engaging in challenging tasks or learning new skills keeps the brain sharp and may lower the risk of cognitive decline.
• Social engagement. Regular interaction with coworkers, clients, and customers helps combat the isolation and loneliness that can accompany retirement.
• Enhanced purpose. Having a structured routine and responsibilities provides a sense of identity and daily motivation.
• Skill utilization. Continuing to use your professional skills or exploring a new field can help you stay mentally active and creative.
• Physical health. Staying physically active, especially in jobs that require movement, can improve mobility and overall physical health.

Next steps for your financial future

Planning for retirement can feel overwhelming, especially as costs continue to rise and financial priorities shift, and many Americans are navigating retirement planning on their own. According to recent research, only 38% of retirees say they worked with a financial professional. Only 37% of adults age 50 and older say the same.¹⁴

The good news is that it’s never too late to take steps toward greater financial confidence. Whether you’re already retired or preparing for retirement in the years ahead, working with a trusted financial professional who can identify potential gaps in your plan can help you build strategies that support your long-term goals and ensure you feel secure about your financial life in retirement.