Retire from, Everything? How to roll out retirement for investors with multiple income streams

Employees may be more worried about the “how” than the “why” of their choice to retire. It may be that employees feel that they’ve reached a certain magic number in their retirement and are supposed to retire from all of their jobs, instead of transitioning into a different schedule.

A new trend of working more than one job to cover rising health care costs or make up for stagnant wages has some employees nearing retirement asking how they should plan for retirement. Do they retire from everything? For those whose side business is their passion, whether that be piano lessons or painting pottery, they may want to retire from the 9-5 life and continue to pursue their side business. And having multiple jobs to retire from is even more common among those involved in family businesses that pass down from generation to generation.

Plan Sponsors walk a fine line in encouraging employees to pursue side businesses given the possibility of conflicts of interest as well as decreased attention at work. However, many employees can be more productive with less stress over retirement or with greater enjoyment through their side businesses. Whether it’s your employee or their spouse who has special considerations in retiring from more than one job, a Plan Sponsor can help by educating employees on these crucial topics.

The key to helping employees make a smooth transition into retirement from some or all of their jobs may be the retirement plans that the employee used or were available. As discussed in other blog posts, many employers are offering part time or seasonal workers retirement benefits. Savvy employees may want to invest in more than one company’s 401(k), SEP, or other retirement options to help catch up or max out contributions. Those employees may now need help figuring out how to continue to contribute to one retirement account while retiring from another. A tax advisor from your retirement account can help employees learn about possible tax implications of those contributions and retirements.

Employees whose side business may be paid as a consultant or via sales, e.g., would not automatically have taxes taken out, may need assistance determining how to continue to work on their side business and pull from their retirement amounts without creating a massive tax headache. While employees may have individual or specific questions on those tax issues, Plan Sponsors can help employees by encouraging them to see tax assistance. One smart way to do so could be as easy as sponsoring a mixer or happy hour with local accountants and tax preparers and employees so that those who may feel like tax assistance “isn’t for them” can become more comfortable with their options. That kind of meet and greet also ensures that a Plan Sponsor isn’t recommending any one tax advisor over another.

Aside from the tax consequences of retiring from all or less than all jobs, an employee may need to figure out other aspects of such a transition.  Plan Sponsors can help employees make these decisions by providing them with resources about this choice. Employees may be more worried about the “how” than the “why” of their choice. It may be that employees feel that they’ve reached a certain magic number in their retirement and are supposed to retire from their jobs. That may be the right answer for most employees will be to continue to stay active and engaged in their retirement. Those with side businesses (like the piano teacher) or passions (painting pottery) should be encouraged to continue those passions, as studies show that that kind of engagement has positive impacts on physical and mental health.

For employees who want to retire from a family business, but continue to work on their side business or passion, there could be confusion or even a sense from employees of a lack of concern. Experts recommend that those retiring from family businesses make clear to employees that they are available as resources to them, and at the same time, ensure that they are available on a changed or limited schedule.

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