I am 59 years old. Over the past four years, my income has been the highest it has ever been—nearly six figures. I spent many years (15) without a job or with a very low income to support my family. However, I have worked the minimum number of months required to qualify for Social Security. I also have a decent 401(k) and should be able to benefit from my husband’s Social Security. He plans to wait until full retirement age, when he will receive his maximum benefit.
My daughter is getting married next year and plans to get pregnant immediately. She asked me if I would be her nanny when she returned to work, at least for the first year. I feel privileged to be able to do this and she will pay me a small stipend to cover gas and other expenses, but it is nowhere near what I currently make. I knew I would need to buy health insurance, which would be expensive, but I figured I could use my savings to pay for health insurance and other expenses.
If this arrangement breaks down after the first year, I may find another job, although it won’t be at the level of my current income. I have two questions. First, if I stop working at age 61, how will this affect my Social Security earnings record? My full retirement age is 67. Second, if I move money from a traditional 401(k) to a backdoor Roth IRA, will paying taxes have any impact on my Social Security record?
future grandma
look: My pension allows me to defer Social Security benefits. What if I want to receive survivor benefits as quickly as possible?
These big upcoming life events—your daughter’s wedding, the small bundle of joy that finally brings your family, and all the beautiful moments in between—are magical. However, don’t get too excited and forget the critical importance of retirement planning. This is true in any situation, but especially if you’re considering early retirement after sacrificing decades of income.
First to answer your question: Social Security benefits are based on your earnings history. If you stop working at age 61, your benefits will be calculated based on your earnings record up to that point. The Social Security Administration uses your 35 highest earning years to determine benefits, so if you are currently in your highest earning years, these additional years of employment will increase your benefits. As for moving funds from a traditional 401(k) to a Roth IRA, this won’t affect your Social Security record because it has nothing to do with earned income. However, this conversion will result in a tax bill in the year the funds are transferred.
You also mentioned that your husband will receive maximum benefits at full retirement age. I just wanted to clarify that full retirement age is when an individual receives 100% of their calculated benefit, but in reality the maximum benefit is achieved by deferring benefits until age 70. The Social Security Administration allows benefits to begin as early as age 62, which results in lower monthly payments. However, for years between full retirement age and age 70, the agency incentivizes delaying benefits by offering delayed retirement credits. I mention this only because you mentioned “best interests”.
Now return to your reality.
For many people, this stage of life is known as the catch-up period for retirement savers. As you may have experienced, many adults fail to save much for the future when they are busy raising a family. Some people must spend most or even all of their wages on direct expenses, such as housing, utility bills, education and extra costs for children. Others make sacrifices, such as leaving the labor force to raise children or taking low-paying jobs to balance work and family. Later in life, some workers, like you now, reach the peak of their earnings.
Before making any decisions about early retirement, carefully consider how giving up your highest-paying job will affect your long-term financial situation. Consider what your financial situation would be like if you continued working versus stopping early to care for your grandchildren.
I understand why your daughter would ask you to take care of your future grandchildren. Child care is expensive, and quality child care can be difficult to find. She’s also considerate in offering compensation because not every family makes such an arrangement—many simply assume that the grandparents will take on the childcare responsibilities. At the same time, quitting your job to provide full-time care, especially for just a year, means giving up a lot of potential income. This includes not only your salary, but also any investment growth you can earn by continuing to contribute to your retirement account.
Returning to the workforce in your 60s can be challenging. Unfortunately, ageism is common in hiring, and the pressure to work because you don’t have enough retirement savings is very different from choosing to work for enjoyment.
Private health insurance can also be expensive. If your husband’s job does not provide you with coverage, or if he turns 65 and enrolls in Medicare before you do, you will need to pay the premiums yourself. This expense can quickly deplete your income or savings. If you’ve budgeted for this, that’s great, but if not, keep this in mind. The average monthly health care premium for a 60-year-old will be $1,319 in 2025 and is expected to be closer to $1,600 in 2026, according to Kiplinger.
Spending time with your grandson is meaningful and you will obviously consider it a privilege. If this is important to you, you need to be careful with your finances. Sit down with your husband and analyze the numbers. Take a look at how much you save each year for retirement and how much you expect to spend. Consider housing, utilities, groceries, entertainment, medical expenses, transportation, travel and any other expected costs. Also include a cushion for unexpected expenses, such as roof repairs or car maintenance, so you don’t need to dip into your retirement funds prematurely.
A helpful rule of thumb is the 4% rule. Simply put: If you withdraw about 4% of your retirement savings in the first year and then adjust for inflation each year, your savings should last about 30 years. For example, if you have $1 million in retirement savings, your first-year distribution would be $40,000. If retirees are not ready to leave the labor market entirely, they often supplement these allocations with Social Security, pensions, or part-time work.
Maybe you could work out a part-time schedule with your daughter, continue working your well-paying job, and take care of your grandson on other days. This approach allows you to maintain an income, stay insured until Medicare, and reduce any child care costs she would otherwise face.
It’s your life and you have a choice. You are not bound by this job and you should pursue the things that are important to you. But before you care about others, make sure you’ve secured your financial future.