Why Retirement Might Not Be Permanent

You might want to think twice before announcing your retirement once and for all.

Retirement has long conjured up thoughts of easy living, abandoning the rat race, and reaping the rewards that come due after days and months and years of toil. But a new phenomenon, known as “unretirement,” is sending workers back to the workplace in droves, leaving thoughts of a leisurely life far behind.

Read on to learn why many retirees are once again choosing to become employees, and how their return to the work world is working out for them.

Retirement Reversal

As of March 2022, approximately 3.2% of workers (about 1.7 million people) who were retired a year ago have rejoined the workforce. According to Spencer Betts, a certified financial planner and chief financial officer with Massachusetts-based Bickling Financial Services, some retirees could be heading back to work due to the lure of post-pandemic job vacancies and wage increases. Older workers may feel more inclined to return to the workplace than they did during the beginning of 2020.

St. Louis Federal Reserve economist Miguel Faria-e-Castro concurs with that thinking, citing statistics that indicate about 2.5 million excess retirements have been linked to COVID-19 as of August 2021; however, many of these retirees could be reentering the workforce if the opportunities – and the money – are right.

John Tarnoff, an L.A. reinvention career coach, believes that retirement itself may no longer be feasible given today’s economy as well as economic projections for the future. “Retirement is a misnomer — there is no more retirement,” says Tarnoff. “I think that older workers are going to be caught in a tight squeeze, because they don’t have the income overall to keep up with inflation.”

A Number Of Reasons To Unretire

As of May 2022, inflation soared to a 40-year-high of 8.6%. Many people, including retirees, have felt the pain at the pump, the growing concern about grocery prices, and the out-of-reach price of purchasing a home. All of these things make managing day-to-day living expenses on a limited retirement income that much more difficult.

The most recent data provided by the U.S. Census Bureau indicates that in 2017 the mean income for households where at least one person was 65 years old or older hovered around $44,000; Social Security typically comprises the highest proportion of that income, at $16,560. Betts notes that financial concerns faced by older workers may have spurred an increase in retirement-age individuals seeking full-or part-time work even if they are of retirement age. “I think the biggest trend — and it’s been happening for many years — is … sliding into retirement, where it’s like, ‘I’m not going to work 40 hours, I’m going to work 30, 20, 10…’”

Be Knowledgeable About Tax Brackets

Retirees heading back to work need to be aware of the potential tax implications that securing a higher income can bring. Betts offers an example of a retiree working as a consultant, which likely would means submitting a 1099, a tax form for individuals earning money from an entity or person who isn’t their employer. “You might get the same amount of salary. But you’re now responsible for both sides of the Social Security tax. So that’s naturally like a 9% reduction in your pay.”

Workers who have tapped into their Social Security benefits pay 6.2% on their earnings up to $147,000; self-employed individuals are looking at a 12.4% cut, which could possibly be offset by income tax provisions. In addition, your age and when you begin receiving your Social Security benefits can affect how much income you’ll receive. The full retirement age for those born in 1943 through 1954 is 66, and then gradually increases each year until you hit 67 for those born in 1960 or later.

Individuals younger than retirement age can make up to $19,560 annually and still receive full Social Security benefits. In the year when you reach your retirement age, you can make up to $51,960 per year without Social Security benefits being affected.

Betts believes that bringing in more income, even if you’re eligible for retirement, is generally a positive financial decision in the long-term. “[Because retirees are] probably taking less out of their investments, they’re able to save more,” he explains. “Maybe they can put a lot of that towards future retirements, towards an IRA or investment account, or paying down debt more quickly.”

Whether you’re applying for a job in a new field or in a line of work with which your already familiar, Tarnoff recommends focusing on adding new skills to your repertoire and conveying the breadth of your value as an employee. “It’s vital that older workers dive in and roll up their sleeves along with everybody else. There is no reason why an older worker can’t learn the same remote work skills and technology skills as a younger worker.”