Congratulations, you made it to retirement! That permanent vacation is in full swing! No more clocking in and out. You are in charge of your own destiny. All your cares are over. At least, that's what people who aren't retired yet think life is like on the other side!
Since you might already be thinking about going back to work, no one has to tell you that retirement may not be the ticket to fun, easy living that you hoped it would be. Maybe you thought your days would be full of playing golf or travel. But for some reason, the mere idea of spending money creates heartburn. So you may end up staying home, feeling bored and unfulfilled, wondering if this is all there is.
But isn’t retirement supposed to be fun?
You aren’t alone in feeling this way. In fact, 41.5 percent1 of retirees go back to work at some point, which begs the question, is “unretirement” a trend, or a tragedy?
You’ve already put in decades of dancing to someone else’s tune. Showing up when and where you were told. Having to ask permission to take a day off. Coming in on days when the weather was too gorgeous outside to be indoors. Navigating workplace politics. Being at the mercy of incompetent managers. Abiding by dress codes and company policies. Trying to squeeze in R&R on weekends only to fall behind on household and family duties. Feeling the blues about Monday morning start to creep in on Sunday around noon.
You’ve earned the right to pass the torch and do whatever you want, whenever you want to do it.
The truth is, we only have so much time on this planet. Do you really want to spend what’s left making money for someone else? You may feel good and healthy now, but how about when you’re 70?
If you’re like most people, you’ve anticipated retirement throughout your career. So, what is it that could make you consider going back to the workplace so quickly?
Let’s be honest. Sometimes the transition into retirement isn’t easy.
First, a new relationship with time is required. The routine you had for 20, 30, or 40 years has been replaced with a wide-open calendar. In theory, this sounds great. But without blank checks to accompany those blank calendar entries, time can quickly become more foe than friend.
Combating boredom sometimes means staying glued to the TV until you’re glued to the chair. Or filling your days with so many to-dos that you’re even busier than you were when you had a job. Not fun activities, but chores, like cleaning the house or fixing up the yard. Eventually, everything that needs fixing will be fixed. Then, what’s left? Reading? How many hours a day can one person read?
It often takes money to help pass the time in ways that are enjoyable. But spending money doesn’t come as naturally as it did when you were working. In all honesty, it might be kind of painful. That’s because if you’re like most retirees, your new reality with money is even more complicated than your new reality with time — it seems like you have a larger supply of one and a smaller supply of the other.
Gone is that steady paycheck you relied on for decades. This may not seem like that big a deal at first, because you planned and saved for retirement. But it doesn’t take long to realize that managing a large lump sum goes against everything you’ve ever been taught about money. Savings are for saving, not spending! So, how are you supposed to make this lump sum work for the rest of your life when you have no idea how long that will be? How can you feel good about taking a cruise or even a long weekend? What if you need a new roof in 5 years? You can’t earn that money back if the market dips or you spend too much too soon. So what do you do instead? Chances are, spend as little as possible. Which also means you may not be enjoying retirement as much as you could be.
From boredom to financial uncertainty, no wonder so many retirees find themselves scrambling to re-enter the workforce.
Of course, there are some legitimate reasons for retirees to enter “unretirement.” Maybe you retired too early and working is the only way to make ends meet. Or you retired but once you had time to recover from burnout, discovered a new employer was all you needed. Or you always dreamed of starting your own consulting business, and have the time and energy to do it now. But, are those your reasons for wanting to go back to work? Many retirees are lured back because they miss their paychecks and how simple spending money used to be when they were working.
Like every other life decision, returning to the workplace is a very personal one that each of us has to make for ourselves.
The positive of going back to work is easy to see — a paycheck. But the negatives are definitely worth weighing before hitting the job market.
1. Your new job may not look — or pay — anything like your previous one.
Unless you are both very lucky and in a very specialized profession, chances are, the work you’ll find as a retiree may not be the type of work that will offer fulfillment or a substantial income. Plus, all you have to do is read the comments on any article about unretirement to discover that, age discrimination is real. According to a recent AARP survey, 61 percent of older workers have seen or experienced age discrimination, while 74 percent of unemployed adults polled said they had encountered it.2
You may find yourself starting at entry-level, or work in a role that isn’t enjoyable — frantic customer service or standing on your feet all day. Worse yet, you could work for a manager who doesn’t treat employees very well and end up quitting in less than a year. You may be expected to learn new apps and software that isn’t user-friendly and spend every shift frustrated and longing to be home on your own time — at a wage that may be much less than when you left the workforce.
And once the stressful job search is over, a new set of issues may arise...
2. There may be financial penalties for coming out of retirement — and they could be costlier than the income they will bring in.
You may have some budget issues that going back to work for a bit would seemingly solve. Maybe you just want a little more fun money. Maybe you need to help a child or grandchild out of a jam. Maybe you miss having a savings account and just want a little cushion. Those short-term problems can add up to potential money headaches if you come out of retirement.
Coming out of retirement can impact your:
Social Security benefits: Depending on your full retirement age as defined by the Social Security Administration and whether you’ve already begun drawing Social Security, you could reduce your benefits for every dollar you earn above the annual earnings limit. You could also be responsible for paying taxes on your Social Security benefits if your modified adjusted gross income is above a certain threshold. You may have additional penalties, depending on your age and which type of account you withdraw it from. Consult ssa.gov for additional financial impacts that may apply to you.
Required minimum distributions: Depending on your age and your retirement plan, you may have to continue taking required minimum distributions (RMDs) while employed. The rules vary for 401k and IRAs, so check with your plan administrator for specific requirements.
Health insurance and Medicare coverage: If you’re already covered by Medicare, it could impact your eligibility for employer-provided health insurance or impact which provider pays first if you have both Medicare and private insurance. Consult with your employer and Medicare.gov for details.
Pension payments: If you’re currently receiving a pension, your payments may be affected by a new job. Especially if you return to work for your previous employer. Check with your new employer’s HR department as well as your pension plan provider.
Current retirement plan: Once you begin working you’ll probably need to rethink your whole retirement strategy. All of your numbers could change due to retiring later and making additional contributions to your nest egg.
Here’s one more item for consideration:
3. The potentially most expensive consequence of returning to work has nothing to do with money.
None of us like to think about this, but in retirement, our health and mobility have a “use-by” date. Whether your goals are financial or not, being unretired could mean you’ll spend your healthiest years on the job instead of doing the things you always dreamt of. And if you’re married, you have your spouse’s health to consider as well. There could be a time when health may prohibit you from taking that trip of a lifetime. Unfortunately, we’ve seen it happen with some of the retirees we’ve worked with in the past. Our advice is this: don’t delay it and risk missing out.
Is an employer paycheck worth it?
Would answering phones or filing dental records provide the routine or income that would make dealing with the aforementioned potential impacts worth it? Retirement is your last act. Do you really want to spend your golden years in a job that may not satisfy you, has the potential for negative financial impact and could take away your most mobile years?
The good news is, many of the challenges that drive retirees back to the workforce can be addressed with a particular retirement strategy.