As technological and medical advancements increase the average human lifespan, our society has had to re-evaluate its approach to the traditional work model and target retirement ages. In fact, a new survey conducted by Harris Poll for TD Ameritrade recently found that at least one-third of Americans aged 40 or older plan to continue working past the traditional retirement age of 65.
There are also plenty people who retire for a while then return to the workforce a few years later. It’s worth noting that financial reasons aren’t always the motivating factor for someone to go back to work; some people want access to more mental stimulation, socializing opportunities and/or emotionally fulfilling activities than what traditional retirement can offer.
This increasingly popular phenomenon has been called ‘unretirement,’ in which people remain in or return to the workforce for a variety of reasons. It may be the new norm for future generations, who are notoriously behind on saving for long-term financial goals (like retirement) because they’re struggling to make ends meet as it is, thanks to bloated student loan debts and limited income growth opportunities.
What Is Unretirement?
Do you plan to stay in the workforce in some capacity beyond the traditional retirement age range of 62-68? If you’ve considered it, then here’s what you should know about unretirement before deciding whether it’s the right option for you
Traditional Retirement is Dead
Retirement isn’t as simple as it once was. Historically, companies and organizations provided pensions for retired employees; nowadays, there are companies without any retirement plan offerings for employees, let alone matching contributions or pensions. The costs-of-living have also risen drastically in recent years, which has prevented folks with jobs offering comparatively flat wage increases from being able to save as much for retirement as previous generations did.
Social Security currently lists 67 as the full retirement age for people born in 1960 and later; this age is likely to go up over the next several years as we continue to live longer, healthier lives. This means that taking out Social Security – which has been on the brink of financial instability for years – will be less of a guarantee for Millennials, Gen Z’ers and future generations who want to retire in their 60s.
On the flip side of ‘unretirement’ there’s the FIRE movement (financial independence retire early). This movement encourages followers to save 50% or more of their income and create multiple passive income streams so they can quit their jobs in their 50s, 40s or even 30s in some rare cases. Many people who have embraced the FIRE movement enjoy traveling and/or spending time on hobbies they genuinely enjoy (which could be monetized to support your long-term financial stability).
Whether you plan to continue working into your 70s and beyond or you want to quit your day job and travel the world, living off savings by the time you’re in your 40s, the fact of the matter is that traditional retirement is dead.
Reasons for Remaining in the Workforce
People who don’t want to retire in their mid-60s often stay in their jobs for reasons beyond personal necessity. For instance, loneliness and depression are growing concerns among elderly populations in the U.S., which has inspired some people to go back to work, primarily for human interaction benefits. They may not choose to go back to their old jobs, but part-time, customer service-oriented jobs are popular among older folks who want socializing opportunities more than they want a well-paying gig.
Other people choose to remain in or return to the workforce to keep their mental faculties sharp. Staying at home, relaxing, cooking and gardening are undoubtedly fulfilling, but tasks requiring minimal mental effort can make people feel restless and bored. Fears of developing dementia may also spur seniors to remain in the workforce, so they’re consistently giving their brains the workouts they need to stay in good mental shape.
On a financial note, some people stay in the workforce longer to increase their Social Security benefits, which are based on the highest 35 years of income (adjusted for inflation). This is especially important for people who spent less time in the workforce – such as stay-at-home parents or people who went back to school for a while – to maximize your retirement benefits.
How Much Do You Need in Savings Before Retiring?
Generally speaking, you should try to have at least a year’s salary saved up for every year remaining between your retirement age and average life expectancy. For example, if you plan to retire at 68 and your average life expectancy is around 88, then you’d need to save up approximately 20 years’ worth of your salary to comfortably retire.
In the meantime, you should seek out additional passive income opportunities to supplement your retirement savings strategy and support yourself during retirement without constantly dipping into your savings fund. Passive income opportunities include renting out property to tenants (or Airbnb guests), investing in dividend-paying stocks or investing in peer-to-peer lending.
If you’re looking for places to keep traditional investment accounts, you might want to check out investing with Betterment or Stash Invest.
The newest robo-advisor on the market called M1 Finance gives the more established, sophisticated investors great investing options. M1 Finance simplifies the investment process for beginning and experienced investors alike. Unlike other robo-advisors, M1 Finance does not charge a fee, and it gives you the option of taking more control over your investments if you want them (and less if you don’t).
Should You Retire From Your Current Job by 65?
There’s nothing wrong with staying in the workforce longer if you enjoy your job and you want to ensure you’re retiring with more than enough money to cover your living expenses, hobbies, geriatric healthcare needs and funeral expenses (morbid to think about, but still important if you don’t want your surviving family members to be left with the bill).
Even if you quit your current job or leave your career altogether, there are plenty of fun, engaging opportunities to make money to support yourself during retirement.
