Working in Retirement

Working in Retirement

The traditional view of retirement is changing, and it is changing quickly. Retirement was once viewed as a period that you could travel or spend long days with your grandchildren. These days, however, increasingly retirement still involves some amount of work.

The good news? Research suggests that working at least part-time in your retirement might be right for you, both financially and physically.

The key depends on what work you do and how you save the extra money you earn while taking on a part- or full-time job during retirement.

Need to work or want to work?

The unfortunate fact is that many retirees just have no choice but to work, at least on a part-time basis, during their retirement years.

That is because these retirees have not saved enough money to live comfortably during their retirement.

There are many possible reasons for this. The Great Recession took a toll on savings of those approaching their retirement years. For instance, Hoisington Investment Management Company released a study that showed that from the last quarter of 2006 through the third quarter of 2008, U.S. housing values and household holdings of stock fell by $5.6 trillion. That is a great deal of lost wealth.

Since then, improvements in the economy have resulted in higher optimism and confidence from retirees that their retirement will remain financially secure. It has been a bumpy ride, however. From 2009 to 2013, confidence levels were near record lows, according to the March 2017 Retirement Confidence Survey conducted by the Employee Benefits Research Institute. From 2014 to 2016, those confidence levels rebounded and increased each year. Now, retirees who are very confident or somewhat confident that they will have a financially secure retirement is currently at 79 percent. That is around the same level as before the Great Recession.

However, the same study showed that 21 percent of retirees are not too confident or not confident at all in the financial security of their retirement.

In other words, a growing number of U.S. residents will need to work longer if they want to face a comfortable, happy retirement.

Of course, there are also plenty of reasons why people would want to work during their retirement years. For one thing, the world of work has changed. Fewer people are making a living doing manual labor. Retirees can work longer if their work mostly involves sitting in front of a computer screen or making telephone calls.

In fact, a June 2014 report by the Society for Human Resource Management (SHRM) references the new 'retirement workscape.' In this workscape, retirees will continue to find satisfaction from work even after they retire from their primary career.

The SHRM report outlines four different phases of the retirement workscape: Pre-retirement, Career intermission, Re-engagement, and Leisure.

Pre-retirement involves taking meaning steps to prepare for their post-retirement career. Many human resources departments are even engaging employees who are getting ready to retire to explore ways that they might be able to continue work. Flexibility and finding work that is motivating are the key factors.

Once the retirement decision occurs, most retirees want to take a little time off or have a career intermission. That gives them the ability to relax, recharge and retool. Typically, this career intermission lasts about 2.5 years.

Re-engaging in the workforce lasts for about nine years on average according to the SHRM report. However, that re-engagement comes with a new balance between work and leisure and a greater emphasis on flexible careers.

Finally, the fourth phase gives retirees the opportunity to rest, relax, socialize and travel. That is the traditional view on retirement for most people. Such traditions are obviously changing or being postponed to a later stage of retirement.

Impact on other retirement income

Financially, working longer will offer better protection for your other sources of retirement income. The extra monthly income that you generate from work can help cover your insurance, grocery, and medical-care costs. That will reduce the need to tap into your retirement savings.

That extra income may allow you to hold off collecting Social Security benefits until later in life. Remember, the longer you wait to begin receiving Social Security, the more significant your monthly benefits will be. (This holds true until you hit the age of 70. After this point, your monthly benefits will no longer increase.)

Choosing to work after you hit retirement age is an important decision. However, in the right cases, doing so might provide you with both the financial and health benefits that could make your retirement years better ones.