Retirees are ditching vacations in the Caribbean, midday feedings of pigeons in the park and hours of frolicking with their grandkids for a once familiar reality. A growing number of older people are leaving retirement and reentering the workforce.
The rising cost of living, the increased need for workers and diminishing COVID-19 concerns are prompting older people to return to work after retirement and the trend could continue, according to the Indeed Hiring Lab.
The Labor Department reports that 1.5 million retirees dusted off their suits and briefcases and headed back to work in the past year. But jumping back into the workforce may be easier said than done, as older workers have to deal with the financial, emotional and physical impact of returning to work.
Inflation Hits Retirees Hard
In May, inflation climbed to the highest level since 1981, as consumers paid more for necessities like food and gas. Rising inflation can have a significant impact on the finances of retirees, especially those on fixed incomes like Social Security. A majority of elderly people rely on Social Security as their primary source of earnings.
“Rising prices make older people return to work because they have a limited amount of money to spend each year,” says John Waggoner, senior writer, editor and producer at AARP. “Social Security has adjusted for inflation, but it only does so once a year, so you get some bump up for inflation, but you do have to watch your pennies a little more when you retire.”
While heading back to work can help bring in some much-needed income, retirees should have a conversation with their financial advisor and or accountant to discuss the financial ramifications, says Jim Eutsler, Wealth Advisor/Partner at HCM Wealth Advisors.
Seniors returning to work and receiving Social Security could see a reduction in benefits if they are younger than the full retirement age of 67. Eligibility for Medicare kicks in at 65, but extra income from a job could require you to pay more out of pocket. If you are taking taxable distributions from your 401(k) or IRA or receiving Social Security benefits, there could be tax implications.
“If you don’t plan on what your eventual tax bill will be, you could be in for quite the awakening come March, April next year when you’re putting your taxes together,” says Eutsler.
Dwindling Retirement Savings
Not only does inflation make it harder for retirees to pay for necessities like food and fuel, but it also eats into the value of their retirement savings.
Experts say retirees should have at least $515,000 set aside for retirement, yet they have less than $192,000 saved on average. A retirement confidence survey by the Employee Benefit Research Institute found that half of retirees cite inflation as the reason for their declining retirement confidence.
“Many have to go back to work because they don’t have enough money to match their living potential,” says Bonnie Marcus, executive coach, author, podcaster and founder of Bonnie Marcus Leadership. “A lot of the retirement plans, especially with Baby Boomers were predicated on retiring around 65. That’s not a realistic plan anymore.”
Financial constraints coupled with higher inflation are causing retirees to become homeless at a higher rate than other age groups. Seniors facing depleted savings and higher bills are facing food insecurity and have resorted to food banks and skipping meals. Waggoner notes that “unretirement” is a different experience for people who have to return to work.
“It all depends on whether you left work voluntarily, in which case you’re probably very happy to return,” he says. “You may not be getting all the salary you had, but at least you’re getting some money. If you have to go because your retirement is not working out the way you expected to because of big losses in the stock market or because the price of living has gone up so much, that’s not quite as happy a thing.”
Growing Need for Workers
A record 4.5 million workers left their jobs in March, while the number of available jobs climbed to 11.5 million, the highest since the data was collected. While age discrimination is still an unfortunate reality for older Americans, companies are desperate to fill their ranks and are looking to older workers to fill the need.
“My clients and the companies I work with value mature judgment, experience and knowledge, often specialized knowledge that they are so excited to have a candidate with a significant amount of experience,” says Kathy Lavinder, Founder & Executive Director of recruiting firm Security & Investigative Placement Consultants.
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“It’s not considered a detriment. It’s considered a positive these days because there has been such a loss of talent. Any employer that’s not focused on the gap between what is available and what their needs are is missing a critical element about having a sufficient workforce and sufficient talent pool going forward,” she adds.
Lavinder, who has over 22 years of experience in recruiting, says she’s never seen a time in which people get to work on their terms. Companies are trying to attract older workers with enhanced medical, dental and vision coverage, mental health support and flexible work options like hybrid or remote opportunities.
“Companies are paying up for workers these days,” says Waggoner. “They’re not only offering larger salaries they’re offering signup bonuses. For people who want to be semi-retired and get a part-time job, this is a very appealing time to go. For people having a hard time making ends meet and need to go back to work, it’s not the worst time to go back.”
Diminished COVID Concerns
Older people, who are especially vulnerable to COVID-19, retired early at the beginning of the pandemic because of the risk of being infected and dying, according to research from the St. Louis Federal Reserve. But now, retirees are coming back into the workforce due to waning concerns about getting the virus.
“My gut tells me that people are feeling far more relaxed,” says Lavinder. “We feel like the pandemic is receding — it’s endemic as opposed to critical. People have been vaccinated and boosted in many cases in the older workforce. There’s a feeling that we can move on with our lives. If at this stage of my life I want to go back to work, that’s not a sufficient impediment and I’m ready to go back.”
Another reason older people decided to retire early at the beginning of the pandemic is that the value of housing and stocks increased. Typically when people amass more wealth, they work less. However, this year stocks have plunged amid concern the economy could fall into a recession. This has taken a bite out of many older people’s retirement savings and forced some of them to return to work.
“By and large the people who were harmed the most are the people who lost their jobs in the recession or from Coronavirus and are trying to make up a lot of lost ground,” says Waggoner.
Need for Fulfillment
Some older workers have decided to return to work because being retired isn’t what they thought it would be. Lavinder says that is especially true for people who were eligible to take early or full retirement.
“They feel like they still have some gas in the tank and they want to get back into the work world,” she says. “I get it because these are people who have always had a lot of responsibility. They’re hard-driving, they’ve had significant roles and they are looking for ways to continue to contribute.”
While older workers may be looking for mental and physical stimulation, Eutsler says it’s important they understand the physical and emotional impact of returning to work including if they want to work full or part-time.
“What considerations are they to be mindful of when they do go back to work?” he asks. “These are things like if it’s a physical job, can your body still keep up? Are you willing to learn the technology if it’s a desk job or a computer job? Because odds are that new technology has been implemented since that person left the workforce. Then there’s the more tactical stuff to appreciate – are you gonna be okay setting an alarm clock?”
Eutsler says retirees that have a plan in place about how they want to work in retirement are among the most successful.
“If it is something that you feel you would get satisfaction from, especially if you’re not bound by a contract for a certain duration, I would most definitely encourage you to give it a shot,” he says.
