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Pros and Cons of Working After Retirement


Retirement is a time often associated with tranquil days filled with hobbies, family and well-deserved relaxation. However, an increasing number of retirees are exploring new employment opportunities or considering an extension of their current roles. Deciding whether to work during this stage can be influenced by factors such as the need for additional income, the desire to stay active and the potential impact on your Social Security benefits and personal free time. Speaking with a financial advisor can be beneficial in weighing these options. 

Why You Might Want to Work in Retirement

What leads you to weigh the possibility of continuing to work even after stepping into retirement? The decision is personal and multifaceted. Various studies highlight the range of reasons behind such choices. A 2023 survey from Transamerica Center for Retirement Studies found that 55% of people said they plan to continue working after retiring, citing both financial reasons and a desire for healthy aging, including staying active.

For certain individuals, pursuing a career beyond retirement serves as a financial lifeline, bridging resource gaps for both present and future expenses. Some may find it gives them the sense of purpose and fulfillment or helps them maintain treasured social connections. Others find it aids them in staying mentally engaged and active, warding off the cognitive decline often associated with aging.

The desire to continue working after official retirement isn’t confined to one generation or age cohort. The same TransAmerica survey from 2022 found that 53% of Generation Z, 56% of Millennials, 54% of Generation X and 55% of Baby Boomers said they plan to or already have continued to work in retirement.

Advantages of Working After Retirement 

A retiree talks on the phone while working at her part-time job.

The potential benefits of working beyond retirement are multifaceted and not necessarily guaranteed, as they can vary according to individual experiences. An obvious perk is the added income. This extra money could help in dealing with routine expenses, unexpected costs or boost discretionary expenditures, like travel or hobbies.

Continuing work can also provide a well-defined structure to your day. It offers a sense of purpose and identity, often missed after bidding farewell to a high-impact career. Moreover, it challenges your cognitive skills with problems to solve and new information to understand.

Working offers regular social interactions, as well. Fighting off feelings of isolation and loneliness, which can severely impact mental well-being, is another potential advantage. Lastly, deriving a sense of purpose – be it contributing to a team, helping clients or achieving personal targets – can also boost self-esteem thereby uplifting overall life satisfaction.

Disadvantages of Working After Retirement

The potential drawbacks in choosing to work after retirement also merit close consideration. They should not be viewed as certainties but as possibilities that could occur under specific circumstances. One significant potential drawback is the potential negative impact on your Social Security benefits. According to the Social Security Administration, the benefits may temporarily shrink if you work while drawing them.

Choosing to work could possibly impact the time available for hobbies, travel or other leisure activities planned for this phase of life. Work-consuming life could potentially lead to dissatisfaction or resentment. Moreover, it could result in less family time and reduced quality time with friends. Considering how this may affect your relationships and the quality of your social life is important.

Finally, working after retirement might have tax implications if you’re younger than your full retirement age (according to Social Security guidelines). It can potentially place you in a higher tax bracket, resulting in a larger portion of your Social Security benefits being taxed or even increasing your overall tax liability.

How to Find the Right Post-Retirement Career

A retiree works at her part-time job at a garden center.

First and foremost, take stock of your skills, interests and values. Reflecting on your pre-retirement career, what aspects did you enjoy the most? Was it the tasks, the social interaction or perhaps the sense of accomplishment? This introspection could guide you toward a fulfilling post-retirement career path. Maybe roles related to your hobbies or interests could turn a passion into a paycheck.

Consider part-time or freelance work to ease into retirement. This provides flexibility and allows you to test the waters in your new career while maintaining a work-life balance. Evaluating the physical demands of the job, understanding the work schedule and considering the potential impacts on your retirement benefits is vital.

Further education or training might be necessary if you’re transitioning into a completely new field. Many institutions offer courses tailored for retirees, making it more accessible than ever to acquire new skills.

Lastly, don’t underestimate the importance of financial planning. Ensure your post-retirement career aligns with your financial goals and retirement savings.

Bottom Line

The potential advantages of working post-retirement, including added income and mental stimulation, need to be weighed against potential downsides such as a reduction in Social Security benefits and less personal time. Every retiree’s situation is unique, and what works for one individual might not work for another. The choice to work after retirement remains a deeply personal one, inevitably influenced by an individual’s financial situation, personal interests, health and family considerations.

Retirement Planning Tips

  • Figuring out how much income you need to support your lifestyle in retirement is one of the key components of the retirement planning process. Experts recommend replacing between 55% and 80% of your pre-retirement income, although your percentage may be different. T. Rowe Price, meanwhile, says to start with an income replacement target of 75% and then adjust it based on how much you saved throughout your career and other factors.
  • A financial advisor can help you build a retirement income plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

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