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20 December 2007

Working in Retirement?

Newark, NJ – With today’s longer life expectancies, fewer Americans can afford to rely on their personal savings for 20, 30, or more years in retirement. Whether they need money, simply enjoy working, or both, many Baby Boomers are finding the bright line between the working years and retirement years morphing into a continuum – a gradual progression from more work time to more leisure time – or alternating periods of work and leisure.
“Retirement isn't what it used to be,” said Jill Perlin, vice president, Prudential’s Retirement and Wealth Planning group. “Current trends are showing us that pre-retirees should not rely on Social Security as their only source of retirement income. That, combined with the shortage of traditional pensions and today’s low personal savings rates, means many retirees may have to consider alternative sources of retirement income. When you factor in the increased costs of living in the golden years, longer life spans and the reality that many Baby Boomers expect to care for loved ones in retirement, working in retirement is becoming an increasingly common option for retirees.”
As today’s Baby Boomers continue to redefine retirement, many have come to the realization that working longer may help provide them with greater security in retirement. However, there are numerous considerations that older workers should keep in mind as they contemplate whether, how long, and how much to work during retirement. Working in retirement may also pose certain challenges – ranging from finding opportunities that meet their lifestyle requirements to financial impediments, such as a possible reduction of Social Security benefits for those who are under their full retirement age. In addition, Social Security retirement benefits become subject to income taxes if total income exceeds certain thresholds.
Although older workers may express a desire to work, research shows that they may experience more difficulty in finding a job after having lost a job. According to a recent survey, older workers are generally seen as more productive, particularly in white-collar jobs; however, they are also often perceived as more expensive. Many companies may not be prepared to offer phased retirement arrangements or non-traditional career paths that involve fewer hours, more flexibility, or less responsibility -- options that make working in retirement an increasingly attractive choice for many retirees.
The passage of the recent Pension Protection Act may pave the way for a higher prevalence of phased retirement programs, and make working in retirement more financially viable for older workers who are entitled to defined benefit pensions. Many companies are considering the issue of knowledge retention and transfer, and may be willing to consider providing flexibility for near and recent retirees.
According to Perlin, continuing to work in retirement may provide additional opportunities to accumulate savings in retirement vehicles, even for individuals who have already begun taking distributions. However, she cautions that individuals should be tax-wise in their selection of retirement vehicles and asset allocation.
“There is no one-size-fits-all answer to the question of how to most effectively minimize taxes on retirement distributions,” Perlin continued. “So, it is critically important that while they are still working, pre-retirees understand the tax and non-tax considerations of the retirement savings vehicles they have selected. When considering how to make retirement assets last, it is important to consider tax liabilities inherent in the assets, and determine how best to manage unlocking those tax liabilities over time.”

For more information about important retirement considerations and choices, review and download a copy of The Fourth Pillar: Retirement Choices brochure at Prudential’s website,

Prudential Financial, Inc. (NYSE: PRU), a financial services leader with approximately $637 billion of assets under management as of September 30, 2007, has operations in the United States, Asia, Europe, and Latin America. Leveraging its heritage of life insurance and asset management expertise, Prudential is focused on helping individual and institutional customers grow and protect their wealth. The company’s well-known Rock symbol is an icon of strength, stability, expertise and innovation that has stood the test of time.
Prudential's businesses offer a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds, investment management, and real estate services. For more information, please visit
Prudential, its affiliates, its distributors and their respective representatives do not provide tax, accounting or legal advice. Any tax statements contained herein were not intended or written to be used, and cannot be used for the purpose of avoiding U.S. federal, state or local tax penalties. Please consult your own independent advisor as to any tax, accounting or legal statements made herein.
Insurance products issued by The Prudential Insurance Company of America, Newark, NJ, and its affiliates.
Securities products and services offered through Prudential Investment Management Services LLC and Prudential Annuities Distributors, Inc. All are Prudential Financial companies, and each is responsible for its own financial condition and contractual obligations.
IFS-A141713 Ed 12/2007
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