It may seem tempting to ride off into the sunset as soon as you reach retirement age. But it turns out that many of those who are now faced with that ride would rather gallop toward a growing phenomenon known as “unretirement.” by Peter Chawaga
Unretirement is a period that more Americans find themselves entering or preparing for than ever before, making the decision to retire from full-time employment and then taking on part-time, volunteer, or consulting roles for financial or lifestyle reasons.
“I think retirement has changed,” as David Dedman, president of Lexington Wealth Management, put it. “I’ve been in financial services for 27 years and when I was a young advisor, people would retire around 65 and live off of their investments and social security. Today, more and more continue to work into their 70s because they either like what they do or like the challenges.”
Why “Old Dogs” Are Learning New Tricks
Research conducted by the Transamerica Center for Retirement Studies in 2019 found that 55 percent of American workers plan to semi-retire, with 41 percent expecting to work part-time and 14 percent expecting to work full time in their unretirement.
“The number of workers in the 65 to 74 range is growing faster than ever before,” explained Ron L. Brown, president of Lexington’s Ron L. Brown Wealth Management. “Back in 2017, the Bureau of Labor projected that over the 2014 to 2024 decade, the labor force growth rate of the 65- to 74-year- old age group would be about 55 percent, and the labor force growth rate of the 75-and-older age group would be around 86 percent. This was compared to a projected 5 percent increase for the labor force as a whole.”
But the rise of unretirement can be traced to many things beyond the increase in this workforce, including longer life expectancies among older workers, new working roles that are well suited to semi-retirees, and the chance to reduce working hours earlier in life. Many people reach the age of retirement well before they want to stop working.
And for some, the decision to unretire may also stem from financial need. After all, long gone are the days when a seasoned worker could enter the office on a Friday, and then leave with a gold watch and a hefty pension, never to return.
In an example of this change, many Americans are finding that Social Security benefits alone are not enough to maintain the lifestyles that they want.
“The most common reasons workers ages 65 and older work part-time are retirement (i.e., from full-time employment) and/or the Social Security earnings limit,” a 2018 study by the AARP Public Policy Institute found. “About six in 10 workers in this age group indicate that these were their primary reasons for working part-time.”
Still, unretirement is rarely just a financial decision. Many of the unretirees buoying this movement are looking to fill their golden years with purpose and motivation outside of the home.
“We have personally seen an increased number of clients that plan to semi-retire or work during retirement,” said Brown. “Oftentimes, it’s about having additional income during retirement. However, maintaining a sense of purpose or starting a business are also common reasons.”
“There’s definitely been an increase in the number of my clients wanting an unretirement,” said David Dedman, president of Lexington Wealth Management. “They like the thought of being able to retire at any point they want because they are financially independent. Work becomes more of a hobby than a financial necessity.”
Tax and Benefit Considerations
But those who plan to enter unretirement have more to consider than the type of role they’d like or the latest lingo being used by their new coworkers. There are tax and retirement account repercussions to earning part-time income as well.
Firstly, there are Social Security considerations. You can enter unretirement and start claiming Social Security payments as early as age 62, but you won’t be able to access the full benefits that early. Full payments must wait until you reach “full retirement age.” For those born between 1943 and 1954, the full retirement age is 66 years old. The full retirement age increases steadily for those born between 1954 and 1960 and, for those born in 1960 or later, the full retirement age is 67 years old.
For those who enter unretirement before their full retirement age, there is also a cap on the amount of income you can earn.
“If you’re under full retirement age and took Social Security at 62, any income over $18,960 is subject to Social Security taxes to the tune of $1 for every $2 earned,” explained David Smyth, senior partner at Lexington’s Family Financial Partners, Inc. “This is something to keep in mind.”
Earning income at this age can also have tax repercussions that should be considered.
“Working during retirement can cause unexpected social security taxation issues, and result in higher capital gains taxes on investment holdings,” Brown said. “For social security tax avoidance, you need to keep your combined income below $25,000 if filing as an individual or $32,000 if filing a joint tax return. As is typical in financial planning, there are a number of exceptions and strategies, but this is a good starting point.”
And there are considerations for those with tax-advantaged retirement accounts such as Individual Retirement Accounts (IRAs) and 401(k) plans as well. For many of those who reached age 70 and a half before January 1, 2020 or have reached age 72 since, there are requirements to make minimum withdrawals from these accounts and those withdrawals must be balanced with any unretirement income come tax season.
Any unretiree who plans to earn an income should conduct due diligence around how this might affect their Social Security benefits or tax payments.
Unretirees may consider how their new positions allow them to give back to society, pursue their personal passions or impart their experience to the next generation of workers.
“The last thing you want is to retire, then take on a position that doesn’t give you the flexibility to enjoy your family and other interests.”
Remaining Young At Heart
But finances are far from the only consideration when one prepares to unretire. Those who are reentering the workforce must find a role that fulfills their new needs — often very different ones than they had during their full-time employment.
In addition to the right balance in work hours, responsibilities, and wages, unretirees may consider how their new positions allow them to give back to society, pursue their personal passions or impart their experience to the next generation of workers.
Take Gary Nees, a 70-something from Oregon who turned his unretirement into an opportunity to travel the world with the study abroad program The Experiment In International Living. The program paid him a $900 stipend and covered his expenses to lead a group of high school students on a month-long cultural immersion trip to Mexico.
“About four years ago, when I was planning my retirement, I contacted the Experiment and asked, ‘Hey, do you hire old people?’” Nees described his experience to AARP for an article about unretirement on its website. After landing the role and leading the trip, Nees found a type of fulfillment that is all too rare for retired people. “I felt so accepted. I didn’t know what they were talking about half the time, but it didn’t matter... I was Grandpa.”
New roles can run the gamut, depending on what an individual is looking for. In Lexington, for instance, financial planning professionals have seen all shapes and sizes of unretirement.
“I’ve seen many folks find new jobs or volunteer opportunities, and because they had the financial means to retire, these gigs are often things they’re more passionate about,” said Smyth. “I’ve seen people become greeters at their favorite golf course, waiters in local restaurants or seasonally at Keeneland, or tour guides at our many distilleries.”
But one thing that does seem constant in unretirement is that a new job should lend itself to a high-quality life, to allow older workers to enjoy the types of lifestyles they have earned.
“There is really no ‘best’ unretirement occupation, however, we do typically recommend that if a client is looking for a job to solely supplement their income, they start with the lower-stress positions,” explained Brown. “The last thing you want is to retire, then take on a position that doesn’t give you the flexibility to enjoy your family and other interests.”
Thinking of Unretiring?
According to the AARP, these are the top part-time jobs for seniors and retirees:
According to The Balance Careers, these are some more great options for unretirees: