After retirement, continuing to work may seem contradictory at first glance, but in reality, it is a beneficial concept. Even though you have retired from your full-time career, setting aside some time to engage in money-making activities can enrich your retirement life, leading to greater satisfaction and financial benefits.
Here are nine reasons to consider rejoining the workforce after retirement:
In general, savings and retirement plans should cover basic living expenses for retirees. However, factors such as inflation, long-term care needs, and rising healthcare costs should also be taken into account.
A survey conducted by the Insured Retirement Institute revealed that only 18% of the baby boomer generation is confident in having enough money to live comfortably in retirement. Those with pension plans have a 45% higher confidence level.
In essence, if you haven’t saved enough money for retirement, you might end up needing to continue working as you get older. Even if you have enough saved for retirement, part-time income can significantly supplement and extend your savings over time.
Working part-time in retirement can provide various financial benefits:
1. Paying for essential expenses. Continuing to work can cover basic expenses like housing, food, utilities, and healthcare without having to dip into retirement savings. By doing so, you can invest a portion of your retirement savings actively and enjoy a higher quality of life.
2. Increasing savings. By participating in a 401(k) plan, you can contribute up to $22,500 annually as of 2023, with an additional $7,500 catch-up contribution available for those aged 50 and older. Once you reach the contribution limits for your 401(k) or IRA, you can continue saving through deferred annuities.
3. Adjusting the amount withdrawn annually from your savings account based on your needs is crucial. Several factors influence your withdrawal rate, such as market fluctuations, interest rates, inflation, healthcare costs, and risk tolerance. Earning income from part-time work can help offset these factors and prolong your savings.
4. Maximizing your Social Security benefits. Although you can start receiving retirement benefits at 62, delaying can be a wise decision. For each year you delay, your benefits will increase, reaching its peak at 70. Your Social Security benefits are calculated based on your highest 35 years of income, not on your non-working years. Therefore, staying employed can potentially enhance your retirement benefits.
Research from the University of Michigan’s Health and Retirement Study indicates that most people are unaware of how their work can impact their cognitive abilities in retirement.
According to Deputy Research Scientist Amanda Sonnega from ISR, “Your work may influence your cognitive abilities in later life.” Studies have found that retirement is associated with a certain degree of cognitive decline, even when considering other age-related health changes.
“In general, work seems to provide a level of cognitive stimulation that may protect against cognitive decline in old age,” said Sonnega. “Researchers are exploring which factors in the workplace play a role in this effect.”
Part-time work offers the opportunity to transition into new roles and experiences, providing numerous benefits. As you age, psychologists suggest accepting new challenges to slow down cognitive decline.
If you retire before turning 65 (the age when you are eligible for Medicare), you may need to pay for Medicare or medical expenses out of pocket. Once retirees no longer have employer-sponsored health plans, the high costs of medical care can be alarming.
The solution? Find an employer that provides health insurance even for part-time employees.
Working part-time for a company that offers health insurance benefits can save you hundreds or even thousands of dollars per month. Major corporations such as Starbucks, Ikea, UPS, Costco, Delta Air Lines, Trader Joe’s, Lowe’s, REI, and the American Red Cross provide health insurance benefits for part-time employees. You can search online for companies that offer part-time employee health insurance benefits.
Additionally, once you qualify for Medicare through work, you may still need to cover significant prescription drug costs. Even at age 65, Medicare leaves a significant coverage gap that employers can supplement with additional health insurance or Medicare Supplement Insurance.
Moreover, Medicare does not cover all medical expenses. Chris Porteous stated in a previous Due article that “the average cost of a hospital stay before the pandemic was $285,000, meaning even with health insurance, you could still face substantial medical bills.”
He added, “Medicare does not cover key health needs for retirees. These include long-term care, dentures, and hearing aids. With 70% of elderly individuals needing long-term care, this can present significant financial challenges.”
“The average cost of a long-term care facility is $4,500 per month,” Chris noted. If you don’t have Medicare Advantage, it might not be covered by Medicare, leaving you responsible for a portion of long-term care costs.
“Although Medicare covers many medical expenses, it does not pay for long-term care or custodial care for beneficiaries,” he continued.
The more money you earn in retirement, the less you need to withdraw from your investment portfolio.
For instance, as a retired part-time worker earning $20,000 annually, according to financial advisor and physician Carolyn McClanahan, a $500,000 investment portfolio can generate $20,000 in yearly income following the 4% withdrawal rule. In most cases, earning $20,000 annually through part-time work is easier than accumulating an extra $500,000.
Miami-based financial advisor and certified public accountant Karl Schwartz stated, “By not having to withdraw from your investment portfolio, investments can continue to grow.” “In this scenario, your assets can grow for an extended period.”
Robert J. Waldinger, Psychiatry Professor and Research Director at Harvard Medical School, highlighted that social connections play a vital role in one’s well-being after retirement based on the Harvard Adult Development Study since 1938.
In retirement, joyful retirees replace former workplace relationships with new social connections. Regular work—be it full-time, part-time, or volunteer work—creates a new interactive environment.
Furthermore, research shows that various social relationships (such as those developed through part-time work) help alleviate stress, reduce the risk of cardiovascular diseases, mitigate depression, and even extend lifespan.
Did you know? If your part-time income is below the Social Security Administration’s earnings limit, you can work and receive retirement benefits without a reduction.
In 2024, for salaried workers who have not reached full retirement age, the earnings limit is raised to $22,320. For earnings exceeding $22,320 annually, the SSA deducts $1 for every $2 earned.
For those reaching full retirement age in 2024, the earnings limit is $59,520. Earnings over $59,520 trigger a $1 deduction for every $3 earned until the individual reaches the month correlating to full retirement age. However, individuals over full retirement age in 2024 face no earnings deductions from their retirement benefits.
These are some essential aspects about retirement that often go unmentioned. You might experience boredom, especially if you retire early. However, engaging in new work after retirement can combat this feeling.
Continuing to work post-retirement can provide mental stimulation. Facing long days of idleness suddenly can lead to boredom. By working part-time, you can still travel, spend time with family, and enjoy the satisfaction of working.
After retiring, when you meet new friends, they often ask, “What do you do?”. Individuals with jobs typically cite their job titles in response. However, for retirees, this question can be challenging to answer.
One’s work often signifies their contribution to the community and their ability to add value to others’ lives, making part-time work a beneficial outlet.
“By leveraging past experiences, skills, and connections, you can find part-time work or create new opportunities based on your interests,” said author Sally Balch Hurme in “Get the Most Out of Retirement.” “Your passion for a particular subject or field will make you a successful employee.”
As mentioned earlier, staying socially active and exercising your brain can improve health, reduce the risk of severe illnesses, and participating in creative part-time work can benefit both your mental and physical health, providing the best path to maintaining good health.
Furthermore, with a little effort, you can utilize your creative talents to generate income.
For instance, now that you have the time, you can finally pursue your hobbies like painting, photography, woodworking, or baking. Selling your products at local stores can bring fulfillment and serve as a great source of additional income. Alternatively, platforms like Etsy offer opportunities for online sales of your products.
In any case, turning your lifelong hobbies into an exciting and profitable part-time job is entirely achievable.
It’s evident that retiring doesn’t always mean the end of working; rather, it can mark the beginning of a new chapter filled with opportunities for personal growth, financial stability, and overall well-being. Embracing part-time work in retirement may just be the key to a fulfilling and satisfying life post-career.