The traditional view of retirement is changing, and it is changing quickly. Retirement was once viewed as a period that you could travel or spend long days with your grandchildren. These days, however, increasingly retirement still involves some amount of work.
The good news? Research suggests that working at least part-time in your retirement might be good for you, both financially and physically.
The key depends on what work you do and how you save the extra money you earn while taking on a part- or full-time job during retirement.
Need to work or want to work?
The unfortunate fact is that many retirees simply have no choice but to work, at least on a part-time basis, during their retirement years.
That is because these retirees have not saved enough money to live comfortably during their retirement.
There are many possible reasons for this. The Great Recession took a toll on savings of those approaching their retirement years. For instance, Hoisington Investment Management Company released a study that showed that from the last quarter of 2006 through the third quarter of 2008, U.S. housing values and household holdings of stock fell by $5.6 trillion. That is a great deal of lost wealth.
Since then, improvements in the economy have resulted in greater optimism and confidence from retirees that their retirement will remain financially secure. It has been a bumpy ride however. From 2009 to 2013, confidence levels were at record lows, according to the April 2015 Retirement Confidence Survey conducted by the Employee Benefits Research Institute. In 2014, those confidence levels rebounded and again increased in 2015. Retirees who are very confident or somewhat confident that they’ll have a financially secure retirement increased to 58 percent.
However, the same study showed that 24 percent of retirees are not confident in the financial security of their retirement
In other words, a growing number of U.S. residents will need to work longer if they want to face a comfortable, happy retirement.
Of course, there are also plenty of reasons why people would want to work during their retirement years. For one thing, the world of work has changed. Fewer people are making a living doing manual labor. Retirees can work longer if their work mostly involves sitting in front of a computer screen or making telephone calls.
In fact, a June 2014 report by the Society for Human Resource Management (SHRM) references the new ‘retirement workscape’. In this workscape, retirees will continue to find satisfaction from work even after they retire from their primary career.
The SHRM report outlines four different phases of the retirement workscape: Pre-retirement, Career intermission, Re-engagement and Leisure.
Pre-retirement involves taking meaningful steps to prepare for their post-retirement career. Many human resources departments are even engaging employees who are reaching retirement to explore ways that they might be able to continue work. Flexibility and finding work that is motivating are the key factors.
Once the retirement decision occurs, most retirees want to take a little time off, or have a career intermission. This gives them the ability to relax, recharge and retool. Typically, this career intermission lasts about 2.5 years.
Re-engaging in the workforce lasts for about nine years on average according to the SHRM report. However, that re-engagement comes with a new balance between work and leisure and a greater emphasis on flexible careers.
Finally, the fourth phase gives retirees the opportunity to rest, relax, socialize and travel. That is the traditional view on retirement for most people. Although such traditions are obviously changing, or being delayed to a much later stage of retirement.
Impact on other retirement income
Financially, working longer will offer much greater protection for your other sources of retirement income. The extra monthly income that you generate from work can help cover your insurance, grocery and medical-care costs. That will reduce the need to tap into your retirement savings.
The extra income might also allow you to hold off on receiving your Social Security benefits until you are older. Remember, the longer you wait to begin receiving Social Security, the larger your monthly benefits will be. (This holds true until you hit the age of 70. After this point, your monthly benefits will no longer increase.)
Choosing to work after you hit retirement age is an important decision. However, in the right cases, doing so might provide you with both the financial and health benefits that could make your retirement years better ones.
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