Many retirees are finding that retirement isn’t all it’s cracked up to be, and they’re returning to work in some way. In fact, the number is in the millions, as indicated by the results of a recent survey of retirees conducted by T. Rowe Price. They report that 1.5 million retirees had reentered the workforce as of March 2022, following a retirement during the pandemic.
As a result of this development, “unretirement” has been added to the retirement lexicon as a phenomenon in the ever-evolving world of retirement strategies. Let’s dig into the details to see if unretirement might make sense for you.
What Is Unretiring?
Unretiring is returning to work in some way after considering yourself retired. The most typical example is when someone retires full time, doesn’t work at all for income for some period of time, then goes back to working for income.
Of course, there are many definitions of retirement, including some that don’t include retiring from work completely. For example, some people purposely elect a “phased retirement” where they intentionally transition from full-time work to part-time work. In this situation, unretirement could mean increasing your hours back to full time.
Why Would Retirees Choose To Go Back To Work?
Usually, unretirement is a response to realizing that your original concept of retirement isn’t working for you. There can be many reasons to unretire:
- You need more current income to pay for your living expenses.
- Medical insurance is too expensive because you retired before age 65, the eligibility age for Medicare.
- You realize that you need to increase your retirement income, so you take steps to boost your eventual retirement resources (more on this topic later).
- You’re bored with retirement as a full-time vacation and want to find more purpose, meaning, and mental stimulation.
- You miss the social interaction that comes with work.
- If you’re married, you aren’t ready for the constant companionship of full retirement, as indicated by a common lament—”Now I have twice the husband and half the income.”
- A life disruption could result in a need for more income, such as a spouse, parent, or dependent needing expensive medical or long-term care. Another example is an unexpected setback in your financial security, such as a substantial increase in your living expenses or a reduction in your retirement income, possibly due to a stock market crash.
There Are Many Ways To Unretire
Unretirement involves working in some way for income after an initial period of retirement. There can be many ways to work in retirement. For instance, you could:
- Return to the prior job that you retired from, either part time, full time, and in the same job or a new role,
- Embark on an encore career, where you build on your expertise and experience but go in a new direction, perhaps with a new employer or self-employment, or
- Strike out in an entirely new direction, and build a new set of skills and experience.
The possibilities are limitless: You could work part time or full time as an employee, you could work as a contractor, or you could start your own business.
What Are The Benefits Of Unretirement?
Simply put, the benefits of unretirement can be:
- Increased current income,
- Employer-paid medical insurance,
- Building higher retirement resources and income,
- Mental stimulation, and
- Social interaction that can be automatically supplied by working.
Let’s drill down on building higher retirement resources and income. One obvious advantage to working again is that you can stop withdrawing from your invested retirement savings, allowing them to grow until you return to retirement.
Another financial advantage comes if you’ve already started your Social Security benefits and you’ve attained your Social Security full retirement age (FRA) but haven’t yet attained age 70. In this case, you could suspend your Social Security benefits and increase your eventual benefit with delayed retirement credits. Your FRA is age 67 if you were born in 1960 or later, and it’s an earlier age if you were born before 1960.
What Are The Drawbacks Of Unretirement?
There can be financial drawbacks to unretirement:
- Your current Social Security benefits might be reduced if you’re receiving Social Security income before your FRA and you earn enough income from working to trigger Social Security’s earnings test. Once you’ve attained your FRA, the earnings test no longer applies.
- If you’ve started Medicare, then additional income could trigger IRMAA surcharges on your Medicare premiums.
- Any additional income from working will be subject to Social Security’s FICA taxes, and most likely you’ll need to pay higher federal and state income taxes.
There can also be emotional drawbacks to unretirement. For example, you might have become used to the freedom of retirement and resent needing to go to work. And you might not be as energetic as you used to be. Like much in life, there are pros and cons that you’ll need to weigh.
Is Unretiring Sustainable For Individuals And The Workforce?
While there can be considerable advantages to unretirement for individuals and employers, it’s important to acknowledge that any unretirement will be temporary. Eventually, you’ll reach an age when you’re no longer able to work due to health or frailty reasons, you may not want to continue working, or your employer may no longer want you to work. As a result, you’ll need to plan ahead for that time to make sure you’ll have enough retirement income to meet your living expenses.
Who Should Consider Unretirement?
Unretirement can be a smart strategy for working for income during your retirement years. Since there are many financial, health, and lifestyle advantages to working longer, just about anybody should be open to the possibility.