Working after retirement: Pros and cons

To find happiness in post-work life, most retirees need both financial stability and purpose. In fact, according to the Transamerica Center for Retirement Studies, 97% of retirees with a strong sense of purpose are happy in retirement. But CNBC reported in 2022 that many Americans had to delay their retirement to keep up with the rising cost of living.

Can going back to work after retirement help you achieve the financial stability and purpose you need to enjoy retirement? Here’s what to consider before submitting your applications.

What is reverse retirement?

Reverse retirement is when someone who has already retired gets a part- or full-time job. Working after retirement can make it possible to enjoy the benefits of retirement without sacrificing your budget or sense of purpose. Whether it’s part-time work, freelance or consulting gigs, or a full-time job in a new field, working after retirement can help fill budget gaps and give you a sense of fulfillment.

How common is it to go back to work after retirement?

Going back to work after retirement is more common than you might think. But this wasn’t always true.

In 1985, 10.8% of those over the age of 65 were part of the workforce, according to the Bureau of Labor Statistics. And between 2014 and 2024, that figure is expected to grow by 55% for 65- to 74-year-olds, and 85% for workers 75 years and older. While this is a decades-long trend, it’s also tied to the COVID-19 pandemic.

AARP estimated that 1.7 million people who retired during the pandemic are reversing their retirement. Some are padding their retirement accounts to fight off inflation, which they might not have accurately predicted when financial planning early in life. Others simply crave the social connections of their pre-retirement life.

Is going back to work after retirement right for me?

Whether or not you go back to work is a deeply personal choice. Only you can make the final decision, so consider these factors carefully.

The advantages of working after retirement

Reversing your retirement can have big benefits for your physical and mental health, not to mention the community you build along the way. These benefits include:

• Boosting your income: As inflation rises, your retirement savings may not last as long as you had planned. An added paycheck can give you peace of mind. Learn how life insurance for retirement can affect your financial planning later in life as well.
• Staying sharp: “Move it or lose it” applies to the brain, too. When you work in retirement, you exercise your brain in new and important ways every day, whether it’s by learning new technology or communicating with different people.
• Creating a community: Retirement can feel isolating. Your close friends may not be in the same stage as you, and your family members might be busy with their own careers. Going back to work can help you foster a new sense of community and connection.
• Finding a purpose: You might not need to rely on a paycheck the way you did before retiring. This allows you to focus on jobs with a higher purpose, not just those that pay the bills—something that can help you find more satisfaction in your retirement.

The disadvantages of working after retirement

Going back to work also has its drawbacks. Despite the added income and sense of fulfillment, working during retirement can take time away from other things you care about. Consider these cons:

• The effects on Social Security benefits and/or pension: If you supplement your income after retirement, it could impact the Social Security benefits you already receive. Pension plan rules also vary, so check yours before you reenter the workforce to ensure your new job won’t interrupt your payments. While you’re at it, find out how Social Security can be affected by life insurance. You can consult with your financial advisor about your specific situation.
• Missing out on hobbies: Retirement is a great time to pursue your passion projects. If you work, you might sacrifice some time you would’ve used to cultivate a hobby, like gardening, volunteering, or anything in between.
• Less time with family and friends: Working can cause you to miss out on important moments with family and friends. Though you may find flexibility in part-time or freelance work, you might still have to compromise on special events you’d otherwise attend.

Types of jobs to consider for reverse retirement

If you want to reverse your retirement, there are countless types of jobs to consider. Though you could go back to the same industry or even the same company you retired from, working after retirement can be a great opportunity to explore a passion or something new. These are some common job types for retirees to consider:

• Full-time work: For some, retirement is an ideal time for a second career. Take a full-time job at a nonprofit you’ve always loved, or try your hand at contributing to a local magazine. Full-time jobs can not only boost your income in a meaningful way but also allow you to either go back to the job you loved or discover a new professional passion.
• Part-time work: Part-time work is a great fit for retirees who want the benefit of consistent work while reserving some time to really enjoy retirement. You can work part-time for a variety of industries and companies, or even for a local business you already frequent.
• Work from home: The rise of remote work makes reversing retirement even more appealing for some. You can work from home full-time, part-time, or on a freelance basis, which can be a great way to stay in the workforce while still spending time with family.Freelance or consulting: Retirees with specialized skills make excellent freelancers and consultants. Whether it’s in copywriting, business development, human resources, or anything else you can dream up, freelancing or consulting allows retirees to work on their own schedule. Take on as many projects as you want, set your own rates, and keep your mind as sharp as ever.

 

Finances for reverse retirement and beyond

Working after retirement can help you find more satisfaction as a retiree. But how do you know whether or not you need the extra paycheck? Here’s what you need to know about finances in your retirement.

How much do you realistically need to retire?

How much money you need to retire depends on a number of factors: your lifestyle pre- and post-retirement, your pre-retirement salary, your daily living costs, any debt, and any Social Security or pension benefits you’ll collect. The Schwab Retirement Plan Services’ 2022 401(k) survey showed that workers believed they’d need an average of $1.7 million to retire. Talk with a financial advisor to set your own personalized retirement goals.

If you’re close to retirement or already retired and concerned about your budget, you might consider reversing your retirement to ensure you can live comfortably for the rest of your life.

What happens if I go back to work after starting to receive Social Security benefits?

You can work and receive Social Security benefits. But working can affect the number of benefits you receive. If you’re at or above retirement age, you’ll receive the same Social Security benefits whether or not you reverse your retirement. If you’re below retirement age (65 to 67, depending on your birth year), the Social Security Administration will adjust your benefits when you earn above the annual limit. For 2023, that limit was $21,240.

Life insurance and reverse retirement

Finances after retirement can feel daunting, whether you go back to work or not. Tools like life insurance may help you take more control of your retirement, possibly making it so you only work after retirement because you want to.

Permanent life insurance builds cash value and can be particularly useful for retirement planning. If you bought a whole life insurance policy, you can take advantage of the cash value while you’re alive. This might mean taking out a life insurance loan or surrendering the policy for its cash value.

Keep in mind that when comparing term and permanent life insurance, permanent policies are more expensive. There’s also final expense insurance, which is a more affordable permanent policy designed for older life insurance shoppers.

There are also life insurance riders that can assist you if your policy is active during your retirement years. For example, if you have an accelerated death benefit rider and you’re diagnosed with a qualifying condition, you can use a portion of your policy to cover your medical expenses. There are also long-term care riders and chronic illness riders, so check which one your policy might have so you can take advantage if the time comes.

And whether you decide to reverse-retire or not, make sure you prioritize self-care well into your retirement years—you deserve it.