Benefits of Working in Retirement

Working during your senior years doesn’t have to be just about income.

The National Institute on Aging reports that those who participate in regular physical activity, stay connected through social events, and keep up with a hobby have shown signs of or have reported feeling happier and healthier.¹ Working in your senior years can fit all those criteria. While many workers count the days until retirement, some may find that the idea of retirement is more attractive than being retired.

A successful work/life balance in retirement is about understanding the options and building in flexibility.

The Benefits of Continuing to Work

As life expectancies get longer and new technologies improve healthcare, traditional retirement age is becoming less and less meaningful. Now, many people find themselves working into their senior years for reasons outside of just the income.

One aspect of retirement that doesn’t get enough attention until the time comes is the sense of purpose and independence derived from work. You may have been in the same role long enough that it feels like part of your identity. Stepping away from that career can be a mental shift that may take some time to get used to.

To add to that, a common complaint about being retired is the lack of social connection. Since many adult relationships are formed through work, leaving a job could mean leaving close friends. According to a survey from Age Friendly, it’s estimated that more than 60% of older adults who were still working interacted with at least 10 different people every day. When compared to retirees, only 15% of them interacted with the same amount.² Many studies show that social interaction is a central part of a healthy lifestyle and a lack of it can cause physical and cognitive health to deteriorate.

From a financial aspect, continuing to work can have several different benefits. You may be able to delay social security if you have income from a job, which can allow for higher future payouts. In fact, for every year that you postpone benefits after full retirement age, Social Security will add 8% to that payout each year until age 70.

If you’re behind on investing for retirement, continuing to work can give you more time to invest and build up your nest egg. This may seem like common sense, but it can have a significant impact on how comfortable retirement is.

Thinking it Through

Working into your senior years has many benefits, but it’s not always the right choice. Given that stress is commonly associated with higher health risks, continuing to work a job that feels like a drag may hurt your health. However, with the rise of remote jobs and side hustles, it may be possible to step back from full-time employment to work a less demanding job that can provide additional income. This can be especially rewarding if you choose to elevate an avocation into a vocation. Hobbies are generally things we love or find interesting, so looking for ways to give them the structure of work can be particularly rewarding.

For example, a recent retiree combined her lifelong love of dance with her desire to connect more with others. She contacted her local Montessori school and offered to teach a limited schedule of classes. Result: She’s made a host of new friends, is connected to her community in a new way, and has created a different dimension to her art.

The Social Security and Medicare Look-Out

If you’re already claiming Social Security benefits and are under age 70, you’ll need to be careful about how much you make in earned income as it may reduce your benefits. If you’re 70+, you can claim and continue to work, and it won’t reduce your benefits. In both situations, it will increase your income, so you’ll want to carefully review your financial plan to ensure you don’t push income over the limits that trigger a Medicare Part B surcharge.

The Takeaway

Retirement is one of the most significant life transitions we face, and it has a different impact on every person. Continuing to work has its benefits and stepping away from the workforce has its own advantages. However, weighing the benefits and drawbacks of continuing to work, taking your own situation into account, and working with a financial advisor to run through the numbers can help determine which route makes the most sense.

1. National Institute on Aging. Cognitive Health and Older Adults. October 1, 2020. NIA.
2. Driver, Tim. Amanda Henshon. Part I: Working Longer Solves (almost) Everything. Age Friendly. May 26, 2020.