Should You Continue to Work Even With Retirement Income?

While "retirement" in the traditional sense might mean stepping away from your job and not working for money ever again, data shows that a not-insignificant percentage of retirees actually do work. According to data collected by the Federal Reserve, in 2022, 13% of retirees were still working for money, and 4% of all American adults considered themselves to be retired but were currently employed.

Whether you're on the cusp of retirement, or just thinking about your future, it's worth considering whether you should keep working after you start relying on retirement income streams. Here's what to think about.

How much income will you need in retirement?

A common refrain is that you'll need about 80% of your pre-retirement income to live on when you're no longer working. It's reasonable to assume you'll have fewer bills in retirement, especially if you're able to pay off your mortgage loan in full before you retire (if you own a home, that is). Ideally, you won't have a lot of other debt you'll be repaying at this stage of life. And you'll no longer have work-specific expenses, like commuting and professional attire. Plus, if you've begun to live on your retirement savings, you won't be actively contributing a portion of your income to retirement plans anymore.

Your ideal retirement income is dependent on a lot of factors. It's worth sitting down with a financial advisor to run some numbers and land on a target, so you can make a plan to cover your expenses.

What are your retirement income streams?

Ideally, your retirement income will be enough to cover most or all of the bills you'll still have. There are a few major sources of retirement income for many people. You can start collecting Social Security at age 62 (although, if you put that off, you'll receive higher payments -- wait until age 70 and you'll get the highest monthly payment). You might have a dedicated retirement investment account, like a 401(k) or IRA, to draw from. It's wise to also have money in a taxable brokerage account, as that will give you more flexibility.

Depending on your career and personal circumstances, you might even have a pension that'll pay you a guaranteed income during your retirement years -- according to Federal Reserve data, 20% of retirees do. You could also have other sources of income to cover your bills after you've retired (like real estate holdings) -- so why bother working?

Working has benefits beyond just money

Simply put, there are several good reasons you might consider working as a retiree that go beyond just the money. Of course, the extra income might be nice, especially if you've run the numbers to see how much you can expect to live on from retirement accounts, Social Security, and a pension, and come up short. A lot of people hope to travel and live comfortably in retirement -- keeping a job of some kind could certainly help you fund these endeavors without withdrawing from your retirement accounts too aggressively.

Aside from just money, working has less tangible benefits too. It could get you out of your home and allow you to meet new people. It could give you a sense of purpose and the chance to give back to your community. And if you disliked your full-time job pre-retirement, don't assume this means you must do the same kind of work when you don't need as much income to live on. You could work part-time doing something you enjoy instead, or even start a small business based on something you're passionate about.

In my old career, I had the great fortune to know many people of retirement age who ended their time in different professions and then came to work with me in museums (both for pay and as volunteers). They served as gift shop clerks, tour guides, exhibit helpers, and more. They loved the work, even though in most cases it was very different from what they'd done in their careers.

One of my favorite colleagues in my museum days was a man who had worked as a technician for a local nuclear power plant for several decades, retired, and then went to school to get a master's degree in library science. He worked on grant-funded digitization projects for my museum and was one of my favorite people to call when it was time to put up (or take down) an exhibit.

Consider the big picture

Ultimately, whether you should work after you retire from your main career is personal. It involves evaluating your personal finances, including how much money you expect to need in retirement and your existing ways to pay for expenses. If you're a few years away from retirement and counting down the days, consider whether a future part-time job in a different field might enrich your life -- as well as your financial situation.