Financial Considerations Around the Decision to Unretire

Are you thinking about re-entering the workforce in your 60s? Even after making a carefully considered decision to retire? 

The reality is that you are not alone. An increasing number of baby boomers are shifting gears and reversing their decision to retire.

Consider the following from a New York Times article that compiled survey data on changes in American’s attitudes toward retirement:

• More than 25 percent of retirees later resumed working
• 40 percent of workers over age 65 had previously retired
• The number of people over age 65 who are employed either full-time or part-time has climbed from 12.8 percent in 2000 to 18.8 percent in 2016

Four Considerations Around the Decision to Unretire

Perhaps you are finding that retirement isn’t quite what you anticipated. When you were working 60-hour weeks, seven days of leisure activities may have seemed enticing. 

But now, you may be feeling unbalanced or perhaps even bored. So, if you are weighing “unretirement,” here are four steps to take:

1. Weigh your motivations and clarify what you are looking for in life.

While it may seem surprising, financial considerations are not necessarily the primary driver for reentering the working world. 

According to a study conducted by the RAND Corporation in 2017, more than half of retirees would consider returning to work. For those with college degrees, that percentage jumps to 60 percent. 

So, what are the motivational forces that lead people to reconsider life as a retiree? Many find life in retirement is somehow unfulfilling, or that they are missing something.

Today it seems, the workplace may provide people with a support system of interpersonal relationships and social engagement. Another motivating factor can be that a job delivers a sense of purpose in everyday life, from solving problems to satisfying customers. Also, the positive reinforcement that one receives from a job well done can provide a boost to mental health. 

If this describes your situation, consider if you would like to find these benefits in a job again or if volunteer efforts might fulfill that need. What amount of time commitment are you looking for in this phase of life? A few days a week? For how long? Clarify your expectations and parameters. Be clear with yourself about what you miss and what you want from a new position or activity.

2. Consider how unretirement may impact your finances in unintended ways.

While you may enjoy the intrinsic benefits of a paycheck, it is essential to understand the financial consequences of going back to work. You need to answer the question, “What makes the most sense for my family and me?” How will your living expenses be impacted by a change in your retirement status? Will you be eating out at restaurants more often? Will your car expenses, laundry bills, clothing costs and other expenditures increase?

By having a written plan and working with a financial planner, you will be more likely to answer these questions successfully. A registered investment adviser (RIA) can assist you in effectively managing your living costs and properly aligning changes in income with those expenses. An advisor can help you understand further implications of coming out of retirement, such as insurance (health, long-term care and medical), taxes and Social Security.

3. Understand how unretirement impacts your Social Security.

If drawing a paycheck again allows you to postpone using your accumulated benefits, all the better. Even if this is not a significant concern for you and your spouse, waiting to begin receiving benefits will have a positive financial impact for you. According to the Social Security Administration, the longer you wait to receive benefits, the greater they will be. (Retirement Benefits on SSA.gov) You may begin to receive those benefits at age 62 and must start taking them by age 70. 

For those  contemplating unretirement, an important consideration is whether your social security benefits will be affected by your earned income.  If you are over full retirement age (currently 66 for those born between 1943 and 1954) and receiving social security benefits, your earnings are not subject to an income cap and will not reduce your social security benefits.   If you are under full retirement age, earned income can reduce your social security benefit.  According to the Social Security Administration, “If you are under full retirement age for the entire year, we deduct $1 from your benefit payments for every $2 you earn above the annual limit. For 2019, that limit is $17,640. In the year you reach full retirement age, we deduct $1 in benefits for every $3 you earn above a different limit. In 2019, the limit on your earnings is $46,920, but we only count earnings before the month you reach your full retirement age.”

It’s important to recognize that the government is not trying to dissuade you from working. If your social security benefits are reduced by the formula above, your additional work history could help boost your Social Security benefit when you reach full retirement age.

4. Meet with a registered investment adviser to discover options.

As people enjoy longer life spans, the traditional notion of what retirement entails has evolved and may well include some form of employment. 

The decision to work again may provide you with the camaraderie or financial impact you are seeking. And as explained, these sentiments are quite common among people of retirement age. Don’t let worry about the financial implications hold you back. Your RIA can help you understand how unretirement influences both your overall financial plan as well as your revised retirement plan. 

Meeting with an RIA to review your situation and make recommendations will go a long way toward meeting your long-term financial goals.  

In closing, your gifts and strengths do not disappear with your employment. Many non-profit and community organizations would benefit from your talents. Consider donating your time to a cause close to your heart. And don't put too much pressure on yourself. You've worked hard and have earned this time to enjoy life freely. Now is an ideal time to appreciate your community, family, and friends.

Unretire References

New York Times: Many Americans Try Retirement, Then Change Their Minds: https://www.nytimes.com/2018/03/30/health/unretirement-work-seniors.html

RAND: The American Working Conditions Survey Finds That More Than Half of Retirees Would Return to Work: https://www.rand.org/pubs/research_briefs/RB9973.html

SSA.gov: Retirement Benefits: https://www.ssa.gov/pubs/EN-05-10035.pdf

Considering Unretirement? 

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