Should You Keep Working In Retirement?

A surprising amount of people are choosing to continue to work after retiring, and not for the reasons you may think.

Jun 8, 2014 at 2:00PM

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?

Retirement Crown Flick Steven Dipolo

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.

Retirees Flickr Kdothq

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.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers