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Should You Keep Working In Retirement?

There is a lot of coverage in the financial media about early retirement, and the steps you need to take to get there. However, according to a new study by Merrill Lynch, less people are eager to stop working than you might think. In fact, nearly three-fourths of people over 50 say they intend to keep working, even after they "retire" from their careers. What has changed and why do so many people want to keep working in their 60's, 70's, and beyond?

Source: flickr/ Steven Depolo

The new meaning of "retirement"
Apparently, the word retirement is no longer synonymous with "not working anymore". Almost half (47%) of current retirees wither work or have worked since retiring from their primary career, and it looks like this trend will increase going forward. According to the study, 72% of pre-retirees (over 50) say their "ideal retirement" will include working.

However, in many cases, there is some sort of break. The average retiree takes about 2.5 years off before beginning post-retirement work. The average post-retirement career for those who choose to work lasts for nine years, and usually stops due to health challenges or not enjoying the work anymore.

Not surprisingly, the vast majority (83%) of post-retirement workers have part-time positions. Also, 32% are self-employed, nearly three times as many in their original careers. 58% of retirees choose a different line of work than their primary career, usually choosing to take less money to do a job they really want to do.

Why keep working?
There are a variety of reasons why retirees decide to keep working, but it's mostly not need-based. Only about 28% of those who plan to work in retirement say it's because they need the income and don't really want to have to work at this stage in life. The study calls these "Earnest Earners", and identifies the other three types of people that make up the retired workforce.

"Caring Contributors" is the largest group, at 33%, and represents those people who want jobs (and volunteer work) that will give back to their communities and make a difference. A lot of retirees choose to volunteer at libraries, animal shelters, and other non-profit organizations.

flickr/ Kdothq

"Life Balancers" make up nearly a quarter of the working retired population and enjoy the extra income provided by work, but do so in a less-stressful and flexible way than in their previous careers, such as through a part-time job or starting a small business. This group also tends to want to keep working to maintain their socialization during their older years.

Finally, "Driven Achievers" makes up just 15% of the working retired, and describes the group of people who simply can't imagine life without a job. This group includes the "workaholics" and those who feel they are at the top of their career and feel it would be silly to quit while things are going so well.

If you decide to go back to work after retirement
If you're among the majority of pre-retirees and plan on working after you retire from your primary career, there are some financial considerations to keep in mind.

First, your Social Security might be affected. If you're already at your normal retirement age (between 66 and 67 for those born after 1943), you have nothing to worry about. Before you hit the normal retirement age, though, your new job might cost you some of your social security benefits.  Before the year you'll hit retirement age, $1 in benefits will be deducted for every $2 you earn above a certain threshold, which changes every year to affect cost-of-living increases.

Also, if your new job causes your income to rise over a threshold set by the IRS, more of your Social Security benefits might become taxable. The IRS's guide is a good place to get all the details about how working might affect your SS benefits.

Other things that could be affected by returning to work include your pension plan (if you have one), your ability to continue to contribute to retirement accounts, and the required minimum distributions you take from your retirement plan at work. The point is to make sure you check into the financial implications before returning to work, and here is a good overview to help you get started.

Working in retirement can be a great way to stay active, socialize, and give back to your community, all while earning a little extra money. Just be sure you understand how it will affect the rest of your financial life before you jump back into the workforce.

How to get even more income during retirement
Social Security plays a key role in your financial security, but it's not the only way to boost your retirement income. In our brand-new free report, our retirement experts give their insight on a simple strategy to take advantage of a little-known IRS rule that can help ensure a more comfortable retirement for you and your family. Click here to get your copy today.

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Matthew Frankel

Matt brought his love of teaching and investing to the Fool in order to help people invest better, after several years as a math teacher. Matt specializes in writing about the best opportunities in bank stocks, real estate, and personal finance, but loves any investment at the right price. Follow me on Twitter to keep up with all of the best financial coverage!

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