Income Strategies

A Retiring Proposition

For those who stay healthy, retiring and working can deliver the best of both worlds

by Scott Goldberg

Mr. Goldberg is President of Bankers Life and Casualty Company, the national life and health insurer that focuses on the retirement market. Connect with him by e-mail:

There was a time when retirement could be defined by what it was not. Retirement was not working—or having any desire to find paid employment.

Today, we know there is nothing peculiar about being retired and working. Working retirees are all around us, and in many cases, they are thriving. This observation and others comes from the latest report by the Bankers Life Center for a Secure Retirement titled New Expectations, New Rewards: Work in Retirement for Middle-Income Boomers. The study is based on surveys from over 1,000 individuals between the ages of 51 and 69 with annual household incomes between $25,000 and $100,000.

The report reveals several fresh insights, most notably that 60% of middle-class, retiring Boomers expect to stay employed through some portion of their retirement, as compared to just 28% of currently retired Boomers. It’s quite an uptick over previous measures and demonstrates just how much the retirement experience is continuing to evolve, not just from the previous generation, but also across the huge population of Boomers who are transitioning into retirement now.
If anyone might have predicted this shift in attitude, it would be the legions of professional advisors who long ago surmised that millions of Boomers would need to keep working in order to sustain their current lifestyles.

But, according to the survey data, financial reasons are not the main driver behind the decision of so many retirees to go back to work. Two-thirds of working retirees say they are working because they want to, not because they need to.

Many Benefits of Working in Retirement

The responses by working retirees indicate that employment serves as a way to help them stay mentally alert and physically active. It gives them a sense of purpose. And it helps them stay socially connected to others. All of these things contribute to the retirement experience.

Intuitively, it makes sense. For many people, what they do for a living is central to their identity. It gives them a way to apply themselves, contribute to a team, produce something, lead, manage, or just plain get out of the house.
But can working in retirement actually make people happier?
Cause-and-effect is difficult to prove, but the results of the survey demonstrate that, for many people, the experience of being retired and working is producing good results.

  • 77% of working retirees say their stress levels are better now than before retirement, compared to 51% of nonworking retirees.
  • 53% of working retirees say their family relationships are better now than before retirement, compared to 43% of nonworking retirees.
  • 53% of working retirees say their emotional health is better now than before retirement, compared to 29% of nonworking retirees.

On top of these benefits, the extra income is nice, too.
About one in four working retirees say they are using their earnings to offset their day-to-day living expenses. That’s important because whenever retirees can postpone taking withdrawals from their savings for some period of time, they get the benefit of compound interest on more of their money for a longer period of time. Delaying an asset spend-down strategy for just one year can sometimes produce enough value over time to fund withdrawals for multiple years.

There Are Still Challenges to Working in Retirement

Given the combination of financial and non-financial benefits that working in retirement is capable of providing, and Boomer interest in working longer (most say they will work past age 70), “retired and working” appears poised to soon become the new norm. After all, if a good job can create value for the heart, soul, and pocket book, why not just dial back the workload in lieu of a full exit?

Delaying an asset spend-down strategy for just one year can sometimes produce enough value over time to fund withdrawals for multiple years

Well, Boomers will still face some obstacles if they wish to remain employed as retirees.
Poor health tops the list as to why some retirees do not continue to work as they age. Nearly seven in ten retired Boomers were forced to leave the workplace for reasons outside of their control, most commonly because of failing health. Presently, one-third of nonworking retirees would seek employment if their health were to allow it.

Another challenge can be expectations around compensation. Most retiring Boomers who plan to keep working expect to earn a wage that is only “slightly less” per hour than what they are currently earning. But, that’s not typically how it goes. Responses to the survey indicate that most working retirees are earning “much less” per hour than what they used to earn.
Finally, there can be issues with sourcing a paid position that offers a flexible work arrangement, which practically every retiring Boomer with employment ambitions indicates they desire. Today, only 37% of working retirees are in a job that provides them with special flexibility. Flex-time, telecommuting, a compressed work schedule, and job-sharing are all features that attract greater interest by not-yet-retired Boomers than what is actually being experienced by working retirees.

If Retirees Want a Job, They Can Find One

However, the fact remains that if one is willing to accept some of the drawbacks, work is available for retirees. One surprising finding, according to this research, is that landing a job in retirement may not be as difficult as someone might think. Eight in ten working retirees say it was easy for them to find a job while retired. Almost two-thirds indicate that fewer than six months elapsed between the start of their retirement and the start of their new employment, which is typically part-time in nature.

Planning Ahead

For retiring Boomers, there are several key takeaways to be learned from this study that you should discuss with your clients who are considering work as part of their retirement plan.

  1. Work in retirement has benefits beyond just the financial. There is nothing unusual about intending to work while retired. As a matter of fact, while working in retirement is widely regarded as one of the best things a retiree can do to improve his or her financial outlook, it now also appears capable of enhancing the entire retirement experience. As one survey responder put it, spending a portion of time at work promotes a feeling of being “less tired and…more agreeable.”
  2. Work in retirement doesn’t just mean staying in your preretirement job longer. It is essential that retirees who intend to keep working remain flexible in the type of work they seek. Employers may say they value the experience of older workers, but they may not be willing to provide as much flexibility as desired. So encourage your clients to not be shy about expanding the parameters of their job search. Three-quarters of working retirees changed companies in finding a job and slightly more than half changed industries, too.
  3. Healthy living is as vital to a secure retirement as savings. Finally, to have any chance of realizing the benefits of working in retirement, good health is paramount. On that point, failing health can be a financial double whammy. It can be the cause of unforeseen expenses and, at the same time, make it impossible to stay active in the workforce.
  4. Consider a retirement care plan if work is not an option. Many retirees want to work, but cannot, while others are forced to retire earlier than they expect for reasons not in their control. Advise your clients to be prepared in the case they are unable to work. A retirement care plan may include disability or long-term care insurance to protect your clients and their families if working is not possible.The division between work and retirement is blurring and in the process is ushering in changes in how retirees plan for retirement, transition into retirement, and spend their time in retirement. Retiring Boomers have an opportunity to elevate their retirement experience by taking advantage of this new approach, but only if they are healthy enough to realize it. ♦