The coronavirus pandemic has put tens of millions of Americans out of work, strained people's finances, and even among those whose situations haven't changed, many are more fearful about the future. As a result, investing strategies have been altered, and retirement plans are evolving to accommodate these crazy times.
Among those changes in plans, one shift in particular that's being considered by a majority of us is actually a positive one: According to Voya Financial, fully 54% of Americans now plan to work during retirement in some capacity.
To be fair, Voya was unspecific as to what share of people might have been planning to do that even before COVID-19 knocked the economy for a loop, so we don't know to what extent the crisis changed things. Still, it's a smart move for a number of reasons.
1. An extra source of retirement income
U.S. workers should aim to retire with about 10 times their final annual salary socked away in their 401(k)s, IRAs, and other holdings. But the majority of people aren't likely to meet that goal. In fact, baby boomers nearing retirement only have a median savings balance of $144,000, according to Transamerica, which means a lot of them will be needing more money to make ends meet. A part-time job could help bridge that financial gap.
2. Protection from Social Security cuts
It would be hard to overstate how important Social Security is as a source of retirement income for America's seniors. According to the Center on Budget and Policy Priorities, about half of U.S. retirees get at least 50% of their income from the program, and it's the source of at least 90% of income for about a quarter of them.
But at this point, it's necessary to face the reality that benefit cuts are a real possibility. The Social Security Trust Funds are on course to be totally depleted by 2035 -- or sooner, depending on what Washington does next. Once those funds run dry, monthly benefit checks could be slashed by more than 20% due to the major shortfall between the program's revenues and its commitments.
Working during retirement would give seniors -- especially those without adequate savings -- one way to compensate for such a hit to their benefits.
3. A means of staving off boredom and depression
The Institute of Economic Affairs reports that retirees are 40% more likely than workers to be diagnosed with clinical depression, and the reason often boils down to boredom or lack of purpose. Staying busy can help in that regard. Not only can a job provide structure to an otherwise open schedule, but it can serve as a social outlet and antidote to loneliness, getting seniors out of the house and mingling with others regularly.
4. A way to avoid overspending
Boredom and spending tend to go hand in hand. Seniors who don't have enough to do may resort to shopping, whether in stores or online, as a means of keeping themselves busy. But retail therapy is a budget-buster that can have serious financial consequences over time. One benefit of working is that it provides a way to occupy one's time that leads to more cash flowing into your pocket rather than out of it.
It pays to work during retirement
Though many Americans say they are specifically changing their retirement plans due to the impact of the pandemic, the reality is that working as a senior is a smart move that could pay off in multiple ways, even if you come through this crisis relatively unscathed financially.
Best of all, the flexible nature of today's workforce means seniors have more choices than ever when it comes to getting a job. Those who enjoy interacting with people can take customer service or retail positions; those who don't may be able to work as consultants from the comfort of home or join the gig economy. The possibilities are endless, and while the job market may be tight right now, once the pandemic is over, it will hopefully recover, giving seniors the chance to generate extra income and improve their mental health too.