4 Key Reasons Retirees Keep Working (And 4 Reasons Why They Stop)
Retirement marks an important transition—one where many put in their notice and leave their current employer.
But that doesn’t necessarily mean that retirees stop working altogether. As of 2023, 19% of adults over 65 were either working or looking for work as compared to roughly 10% 35 years earlier.
Working in retirement can add several benefits, but there are also some compelling reasons why many retirees stick to their nest egg and leave their working days behind them. Today, we’ll take a look at the pros and cons of working in retirement and how to decide what’s right for you.
Let’s dive in.
Top Considerations for a Retirement Career
For some, working in retirement makes their golden years that much sweeter. Dedicating time, resources, and energy to spaces that lift you up can enhance your retirement lifestyle. Below are some reasons why working in retirement can be beneficial.
1. Establish Regular Routine
You might have been looking forward to shaking up your routine in retirement—not getting up at the same time, having to be out the door early, and back home late. But routines, especially grounded ones, can be beneficial for new retirees. A routine can prevent listlessness, boredom, and dissatisfaction. A steady job (whether part-time or full-time) can bring the routine and stability you’re used to.
2. Find Fulfillment and Meaning
Working in retirement doesn’t mean that you have to stay at a job you dislike or even in the same field. In fact, it’s likely the opposite!
You might pursue a passion project, take on a regular volunteering gig, serve on the board of a community organization, or perhaps explore a new idea altogether. Spending your time on things you’re passionate about fills your life with purpose and meaning.
Say you’re a retired music teacher and you want to start a community choir, or perhaps you’re artistic and want to open an artisan shop on Etsy or other online retailers. You might also consider consulting in your field of expertise. The list goes on and on.
3. Create a New Community
Think about your typical work week routine. You likely came across several different people throughout your day: the barista in the morning, colleagues at work, friends you meet at the gym after your shift, etc. But when you retire, those connections may become much more challenging to sustain.
This dramatic change in community is an issue many retirees face, which can lead to loneliness. Retirees with an enriching community are happier and healthier. Working, even if in a different capacity, gives you a built-in community of people. When you’re pursuing a project or work you love, then those people likely share similar values and goals, giving you a deeper sense of community.
4. Added Financial Cushion
Hopefully, when you retire you’ve reached your ideal number. But extra income could go a long way to furthering more of your lifestyle goals like travel, entertainment, and spoiling your grandkids.
Your new employer may also offer health coverage, which gives you more options health-wise and rein in out-of-pocket health costs. Many retirees experience sticker shock once off a company’s health plan, so if you’re covered by another employer, that’s one less thing you need to spend money on.
Earning income also means that you can keep saving in retirement accounts like an IRA. The SECURE Act made it possible for anyone who earns income to contribute, meaning you could continue to build your savings.
Added income could also boost your Social Security benefits in the long run, since your benefit is based on lifetime earnings. As you can see, there are several ways that working can add to your retirement income plan and pad the bottom line.
5. Bonus: Increased Activity
It can be challenging to stay active throughout your day. Working in retirement keeps new and seasoned retirees on their feet, strengthening their minds and bodies. Regular activity is critical in retirement because active retirees tend to be healthier, live longer, and are at a lower risk for major health issues like falling high blood pressure, or other chronic conditions.
Why Many Retirees Hang Up Their Hat for Good
Working in retirement isn’t for everyone. You might feel added pressure to bring in a certain amount each month and that can be overwhelming for a phase of your life that you’ve worked so hard to secure. Let’s take a look at the reasons why working in retirement isn’t right for everyone.
1. You Don’t Need the Added Income.
For retirees who’ve found financial freedom, the idea of working might not be appealing. If you’ve carefully curated your retirement number, created a cash-flow plan, and have your investments squared away, you may not want to spend extra time on another job. That’s okay!
You deserve your retirement to be how you’ve planned (and saved) for it. Think through how you want to spend your time and where you’ll find your meaning and fulfillment. Maybe you’ll volunteer in the community garden, spend time with your grandkids, travel more, and really enjoy the life you’ve planned and earned.
2. You’re Worried About Reducing your Social Security Benefit
When you collect Social Security has a significant impact on your monthly checks. Under traditional circumstances (if you’re not widowed, a qualified dependent, or disabled) you can collect as early as 62—with about a 30% benefit reduction.
If you collect early and still work, your benefits might also be subject to more withholding via the earnings test. The Social Security Administration (SSA) sets a limit for how much money you can make in a given year and still collect benefits. In 2024, $1 is withheld for every $2 earned above $22,320. In the year you reach your full retirement age (FRA) $1 is withheld for every $3 earned above $59,520.
Keep in mind that this money is just withheld, not permanently lost. Once you reach FRA, you’ll start to receive those benefits back. But it could present cash flow issues early on.
Pro tip: Be mindful of your tax situation in retirement, and how added income could impact your tax bracket.
3. You Plan to Retire a Little Later
Sometimes just working a couple of extra years can eliminate the need to work at all in your golden years. This can be a comfort to many who haven’t quite hit their ideal retirement number yet or who want to make work optional not a necessity.
If you want to work longer to save up, consider the following:
- Max out all your retirement accounts (401k, IRA, etc.)
- Allocate more money to your brokerage account
- Build up your emergency fund
- Keep paying down debt.
Let’s say that working another two years means you could retire at your desired number, debt-free. That is definitely a trade-off worth considering.
4. Life Forced Your Hand
Not everyone retires because they want to or they’re ready. Health concerns, caring for aging parents, layoffs, and forced buyouts are all factors that push many workers in their mid-to-late 50s to retire earlier than planned.
If that’s the case for you, we have a trusted team to help you adjust your plan as needed. Between investments, insurance, savings, we’ll be able to help you come up with a plan that’s still true to you and your goals.
Is Working in Retirement Right for You?
As with any retirement decision, it’s critical to weigh the pros and cons with your unique situation in mind, money, goals, and all.
Ask yourself,
- Do you have a strong retirement plan?
- Where are you on your retirement savings journey?
- Do you enjoy your job?
- Are you energized by the possibility of an encore career or next step?
- Are you confident in your cash flow plan?
- Is your retirement plan comprehensive and reflective of your retirement goals long-term?
We’d love to help you create a plan that works best for you. Get in touch with our team today.
Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted.
All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication of future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.
