Why I Still Work in Retirement

I WAS 62, WHEN MY FANTASY OF RETIRING EARLY became a reality. My company announced a round of buyouts, and when the offering email came around, I jumped at it. After 30 years on the job, it was time to begin a new chapter in my life, I thought.

As long-time empty nesters, my wife and I were in good shape financially. I could stay on her health insurance, and I was lucky enough to have both a pension and a well-funded 401(k). But I wouldn’t be eligible for full Social Security benefits until I turned 66, so I knew that for me to be able to enjoy the life I wanted in retirement, I’d have to continue to bring in some money. Fortunately, I already had a contract for a newspaper column, and I figured I could find other freelance writing gigs. Still, retiring early was scary.

Now, five years after my so-called retirement, I can say my post-retirement career has been a success. I have more time to enjoy myself and my family than I did when I worked full-time, there’s enough money coming in to allow me to explore new things and I have the stimulation and satisfaction of doing creative work that I love. In addition, I’m more confident that my assets will last my lifetime—and it’s possible that I may even have more to leave my loved ones someday. 

I’m not alone in my decision to work in retirement. Nearly a third of today’s retirees report collecting income from a job.¹ And with companies increasingly adopting remote work as the new norm, the ability to do your job from anywhere—even your vacation home—could provide more incentive for people to continue working in retirement. If you’re considering doing so, discussing the following questions with a financial advisor could help you better understand what the extra income might mean for your finances.

Q: How long will I need my retirement assets to last?

At age 65, life expectancy for a man is 83; for a woman the same age, it’s nearly 86.² A 65-year-old couple faces a 50% chance that at least one will reach age 92.  “You should not be planning to live to 83 and 86, but rather to 90 or 95,” says Surya Kolluri, managing director, Retirement Thought Leadership at Bank of America. “That puts an enormous burden on the savings you’ve built up. You need it to last for that longer life.”

Q: Can working in retirement increase the chance that I won’t outlive my money?

There are a couple of key financial benefits of working in retirement. First, there’s a greater likelihood that you can put off collecting Social Security, notes Merrill Financial Advisor Jenna Carroll. Until age 70, for every year you delay past your full retirement age—66 or 67, depending on the year you were born—your benefit will rise by 8%.³ Carroll recommends waiting until age 70, if you can. When clients want to start at 66 or 67, she tells them: “Listen, you're going to get a guaranteed 8% raise every year. Who is giving you an 8% raise?” Claiming your benefits three years before your full retirement age, by contrast, could cut your Social Security income by 20%.

Then there’s this not-inconsiderable advantage: By generating income from a part-time job, you may be able to put off dipping into your retirement savings, allowing your investments more time to seek growth. Because I don’t yet need to take withdrawals from my retirement savings, my investments have grown considerably in the five years since my “retirement.” 

You may also find that you can increase your spending rate as a result when you do begin to draw down your savings. Beginning withdrawals at a later age “enables you to create a little bit more cushion,” says David Koh, managing director, Chief Investment Office, Merrill and Bank of America Private Bank.  It also allows you to pursue things you might not otherwise have done, such as getting involved in philanthropy. “And you may be able to give more to future generations,” Koh adds.

Beyond the financial benefits, of course, there are other good reasons to consider working in retirement.  “For a lot of my clients, working is not just about the money,” notes Carroll. She points to one client who had been in the tech industry and became a substitute teacher. Another who loved music started working in a concert venue. “You get to do something different—something you're very passionate about,” says Carroll.

Q: Is there any downside to the extra income?

Earning income in retirement could push you into a higher tax bracket—something you’ll want to discuss with your tax professional. Once you reach age 65, a higher income can also affect your Medicare premiums.⁴ And if you are already claiming Social Security, as much as 85% of your Social Security income could be subject to federal (and possibly state) income taxes.⁵ Your financial advisor and tax professional can help you weigh these considerations. Start early. “The time to do that is 5 to 10 years before retirement,” says Kolluri.

Before accepting my buyout, I leaned heavily on my financial advisor, who assumed the roles of career counselor and psychologist, too. Now people ask me all the time, “When will you really retire?” I don’t have an answer. The truth is, I can’t imagine not working.

Rodney A. Brooks is a former deputy managing editor and personal finance and retirement columnist for USA TODAY. He is the author of two books on retirement and currently writes a retirement column for U.S. News & World Report.