MML# 080: The planning mistakes that show up when you keep working past 65

A lot of the lawyers I talk to have the same quiet plan. "I'll just keep working."

No hard retirement date, no line on the calendar. They figure that as long as the work keeps coming, the planning can wait.

I get it. Working longer solves a lot of problems. More earning years. More time for the portfolio to grow before you ever draw it down.

But working past 65 quietly creates a second set of problems that most attorneys never see coming. They're not dramatic. They just sit there, ticking, until one of them costs you real money.

Here are the ones I'd want you to know about.

Medicare doesn't wait for you to retire

Around 65, most people sign up for Medicare and move on. If you're still working and covered by your firm's plan, you might figure you can skip it. Sometimes you can. Sometimes that's an expensive miss.

If your firm has 20 or more employees, you can usually delay Part B and stay on the group plan. But the day that coverage ends, a clock starts. You get 8 months to enroll, and if you miss it, the penalty is permanent: an extra 10% on your Part B premium for every 12 months you went uncovered, for the rest of your life.

If your firm has fewer than 20 employees, Medicare becomes your primary coverage whether you signed up or not. Staying only on the group plan can leave you with gaps you won't notice until a claim gets denied.

The surcharge with a two-year memory

This is the one that surprises almost everyone. Medicare charges higher earners more for Parts B and D. It's called IRMAA, and it runs on a two-year lookback.

So the premium you pay at 67 is based on what you earned at 65. For a partner still billing at full speed, that can mean $500 or more a month in Part B premiums alone, sometimes for both spouses.

Your best earning years follow you right into retirement. Keep in mind, seeing it coming a year or two early is usually what softens the blow.

Your old IRAs don't care that you're still working

There's a common belief that if you keep working, you can keep putting off required minimum distributions. That's only half true.

The still-working exception only covers your current employer's plan. Every old 401(k) and every rollover IRA you've built up over the years still starts forcing distributions at 73, working or not.

For an attorney with decades of rollover IRAs, that's a tax bill that shows up right on schedule, stacked on top of a paycheck you're still earning.

The coverage that quietly disappears at 65

This next one catches the people who planned to work the longest. Group disability coverage usually ends at 65 or 67.

So the attorney who intends to practice until 70, the one counting on those paychecks, is often the one with no disability protection for the very years the income matters most. Worth pulling your policy before you assume you're covered.

One window that works in your favor

This one doesn't cost you a thing. It can actually save you money.

While you're working at full income, you're likely in the top tax bracket with little room for Roth conversions. But when you start winding down and dialing back your caseload, your income dips.

That gap year or two, lower income but not yet drawing Social Security or RMDs, is often the best Roth conversion window you'll ever get. Let's say you convert while your rate is lower and pay the tax now instead of at 35% later, when RMDs pile on top. Compounded across the rest of your plan, that can be a six-figure difference.

But it only works if you see it coming. Once you've fully retired and RMDs begin, the window's mostly closed.

Back to that quiet plan

None of this means "I'll just keep working" is a bad plan. Working longer is a great problem to have. It just comes with a few strings attached, and the attorneys who plan around them tend to keep a lot more of what they earned.

A quick reminder: this is general information, not tax or legal advice for your situation. It's my understanding of how these rules work, but run the specifics past your own advisor before you act on any of it.

If any of this hit close to home, I'd love to know where you're at. I have a process that shows you exactly where you stand today and where the gaps are before they cost you anything. If that's you, book a call using the link below.

Cheers,

David