Working in Retirement is Becoming Increasingly Common
You are approaching your retirement years at an interesting period of time. You may be noticing that more of your friends and co-workers are choosing to work longer, either in their current field or by pursuing an encore career.
This trend is definitely accelerating. According to a recent Merrill Lynch publication, over 70% of pre-retirees claim that they want to work in retirement.
The study goes on to state that the average retirement age for Americans has started to trickle back upwards after nearly a century of declines. From 1990-1990, the average retirement age fell from 76 all the way down to 63 years of age. In the most recently completed decade ended in 2010, that retirement age increased for the first time up to 64.
4 Groups Likely to Pursue an Encore Career
I really enjoyed reading this Merrill Lynch study because it not only talked “the numbers” but also discussed why people are pursuing an encore career. Which of these 4 groups do you relate most to?
This group makes up 15% of encore career seekers. They are still at the top of their career game, and are choosing to work not because they need the money, but because they still love the work. About 40% of this group are either self-employed or own their own business.
This group makes up 33% of the population who is working in retirement. They are not working for the money, but instead volunteer or work for non-profits to give back to society.
24% of working retirees fall into this category. These people are seeking more career satisfaction while earning a few extra dollars to shore up their retirement finances. They report high levels of enjoyment in their encore career by finding work that is fun and less stressful.
The final 28% of those working in retirement are in this group. These people are among the least financially prepared for retirement and have determined that they must work to pay the bills and save for when they finally do get to fully retire.
Top Financial Considerations for Each Group
Each of these groups have different priorities as they make their way toward full retirement.
If you are a Driven Achiever, you should be most focused on:
- Rolling over any old 401(k)’s from previous employers into your own IRA. You’ll have more control over your investment choices and often be able to better diversify your portfolio with lower fees.
- Working with your financial advisor to have a detailed retirement plan in place that ensures your long term finances are tracking to meet all of your professional and personal goals.
- Getting the right estate planning documents in place including beneficiary designations, wills, medical power of attorney, trusts and all other actions to help you avoid probate and maximize the transfer of your assets to your heirs in accordance with your wishes.
- Maximizing the value of your business if you’re an entrepreneur. This includes establishing a retirement plan such as a SIMPLE IRA or SEP IRA for you and your employees as well as business succession planning if you’ve been in business for a while.
If you are either a Caring Contributor or Life Balancer, it’s best to focus on:
- Rolling over any old 401(k)’s from previous employers into your own IRA.
- Working with your financial advisor to make sure your encore career is providing you with enough income to keep your long-term finances on track.
- Taking advantage of catch-up contributions into your IRA to further shore up your retirement finances.
- Getting the right estate planning documents in place.
And finally, if you’re in the Earnest Earners group, your top priorities should be:
- Eliminating all debt and establishing an Emergency Fund to cover the financial curveballs that life inevitably throws your way.
- Taking full advantage of matching contributions available to you from your employer
- Making catch-up contributions into your own IRA if your employer doesn’t have a retirement plan.
- Rolling over any old 401(k)’s from previous employers into your own IRA. Old high fee plans can hurt the returns you need to max out your retirement savings.
Think about why you want to work if you’re considering an encore career. Is it because you love your current work, have always wanted to start your own business, want more fun and flexibility in your career or genuinely need the income? Then refer to the priorities listed above to make sure your choice of encore career keeps you on track to meet all of your personal and professional goals as you make your way to what hopefully is a full and happy retirement!
Originally published on Nerdwallet