The Bureau of Labor Statistics estimates that through the year 2024, the rate at which workers age 65 and up participate in the workforce will grow faster than any other segment of the population. So the question is: should you work after retirement? The BLS finds that 42% of workers age 55 and up are in management, professional, and related occupations. For example in 2016, one-third of white-collar employees were at least 55 years old. Self-employment is also common when working after retirement.
Sometimes people work longer because they enjoy it. A report by the National Bureau of Economic Research (NBER) found that even bad jobs are better than no job at all. Working combats social isolation and keeps the mind active as we age. In addition to the cognitive and social benefits, working longer can make a big difference in savings. If you delay your retirement three to six months, you can improve your earnings by 1% over 30 years of earnings, according to the NBER.
Options for delaying retirement
The Federal Reserve Board reports that 1 out of 3 people who retire end up returning to the workforce. But working past retirement age can look very different than a traditional career. Your situation will depend on whether you plan to stay in your current job, or if you plan to change careers, take a part-time job, or volunteer.
If you want to stay at your current job, then your plan will be specific to your employer. Believe it or not, there are very few federal laws for what constitutes part-time vs. full-time work. So, your best bet is to work directly with your human resources department and your company’s management.
The IRS defines full-time work as anything more than 30 hours per week or 130 hours per month. However, there are few governmental requirements for employee benefits. It’s fairly common to offer benefits to employees who work more than 20 hours per week or 1,000 hours total for the year.
Part-time work and phased retirement
Much like young workers initially entering the workforce through part-time internships or apprenticeships, older workers are beginning to exit the workforce by phasing out of their jobs slowly, sometimes called a “phased” or “partial” retirement.
This could mean reducing hours to fewer than 20 per week for the last several years of employment. Often this type of arrangement requires a signed agreement between you and your employer, especially if it means that you are forfeiting benefits. Your employer might require you to commit to an end date when you really are going to retire.
No one knows better than you do the types of tasks and responsibilities you would be able to accomplish in a reduced position. Perhaps your version of a partial retirement is not fewer hours, but changing responsibilities.
You might work out a plan with your employer to move into an advisory or consulting role, or to work from home a few days a week when working after retirement.
Remember to do your research
Before you jump on the idea of going part time, it’s important to truly understand the benefits you would be giving up.
Say, for example, that you decide to reduce your hours to 20 per week, which means you no longer are eligible for health insurance. Perhaps this doesn’t matter much because you’re at least 65 years old and already qualify for Medicare.
But what about other benefits, including your retirement accounts?
If reducing hours means you can no longer contribute to your 401(k) or get your employer’s matching contributions, then consider how this decision affects your overall financial picture. Perhaps you or your spouse have already begun withdrawing from your retirement accounts or taking Social Security benefits. Or perhaps when you crunch the numbers you’ll find that working full time for a few more years makes more financial sense than going part time.
Changing careers and job hunting
Job hunting in your later years can be challenging, but it’s by no means impossible. The good news about today’s aging workforce is that there are more resources than ever before to help you find work.
Start with local organizations by calling 2-1-1 or visiting 211.org, a clearinghouse of government and nonprofit services for everything from housing and crisis intervention to job hunting.
There are a number of private organizations and job boards targeted to seniors as well.
You may wish to start with programming at the local library, church, or community center. You might find workshops, classes, counselors, or meet-up groups where you can exchange ideas and get help with your resume, cover letters, and online applications.
Real stories of working after retirement
It can be lonely sitting at home, sending in job applications over the internet. But you are not alone. There are more workers over age 55 than ever before. It’s even becoming common for people to work past age 70.
The aging overall population will inevitably change the make-up of the workforce, which means there are a lot of people out there just like you.
Maybe you don’t need (or want) to work for money in retirement, but you would like to give back to your community. Volunteering can be a highly rewarding way to keep active in your later years and you might even enjoy it more than your paid career. Be specific about the maximum number of hours and type of volunteer work you prefer. Don’t commit to anything until you test it out. What you did for your career might not translate into a volunteer job you love.
Here are some online resources that provide lists of volunteer opportunities, events, and initiatives according to your location:
Some of these positions might even offer a modest stipend to help you cover the costs of volunteering.
How working after retirement affects retirement finances
Delaying taking Social Security can increase your monthly benefit by up to 30% if you wait until the maximum benefit at age 70. Every month after your 62nd birthday that you wait increases your payments. This is important because once you start taking benefits, your decision is irreversible.
If you decide to continue working and take Social Security, be aware that your benefits may be affected. For example,
- If you are under your full retirement age (FRA), Social Security will deduct $1 from your benefits for every $2 you earn above the yearly limit, which is $17,040 for 2018.
- When you reach the month of your FRA birthday, your work earnings no longer reduce your benefits.
- Your Social Security benefits might be taxed if you have substantial other income from wages, interest, or dividends.
Aside from Social Security, prolonging your work life can benefit your finances by helping you save more, increase your benefits, or grow your money faster through catch-up contributions to your 401(k).
If you are currently earning the highest salary of your career, you might choose to work a few more years to raise the average of your 35-year earning record for Social Security. The more years you work now, the more of your lower-earning years that will fall off the record.
Employee benefits to consider
It’s not only your salary you are giving up when you stop working, but it’s the benefits as well. You might plan to use your health insurance more strategically in your final working years—especially if your current benefits pay more generously than Medicare. Is there a surgery or dental procedure you want to get done now?
Do you have tons of vacation days that won’t get paid to you when you leave your employer? These are not benefits to leave on the table.
Estimate the differences in your retirement accounts if you work a few years longer, increasing your contributions as much as possible. You also might use your last few years to aggressively pay down debt and “practice” living on your retirement budget.
If you can’t do it while you’re still working, think about how hard it will be when you have no work income.