Why (and Why Not) to Go Back to Work After Retiring
Will re-entering the workforce after retirement make sense for you?
If you have recently retired or will soon be entering that phase of your life, you may be wondering if it's a good idea to go back to work. This depends on your lifestyle and individual situation, but below are some considerations that may help you decide which choice is right for you.
Reasons to go back to work after retiring:
The most obvious reason to go back to work after retiring is to earn more income. This could be for any variety of reasons. Perhaps you didn't save as much as you planned ahead of time, or you made bad investments. Maybe you want to do all you can while you're healthy so that you can earn as much as possible to help your family. Whatever the reason may be, working after retirement means bringing home more money.
More savings from your retirement plan
As long as you're still under the age of 70 and you're working, you can continue adding to an IRA or 401(k). This means you may be able to get some more money saved, in addition to your income, by squeezing in a few extra years of work.
Delay your pension/Social Security
By getting in some extra work, you can save your pension for when you're older, so you don't start burning through it right away. It never hurts to have some additional financial padding. You can also delay applying for Social Security by working after retirement.1
Mental health benefits
Not all the benefits of working after retirement are financial. You can reap mental health benefits by keeping your brain active and focused as you age, which can help keep you sharp and content.
Human interaction that comes with working can play a direct role in your mental health as well. Some people spend a lot of time at home alone once they retire. That means missing out on the benefits of a healthy social life. Going to work or working on the phone with colleagues and clients gives you the opportunity to interact with people.
Time well spent
There's also the satisfaction of time well spent. No matter how much you may have been looking forward to retirement, some people do become bored or restless after a while. Work can give you a sense of purpose.
Trying something new
Some people find retirement to be a good time to try a new line of work. Perhaps you've always held other interests that you were unable to pursue professionally because they conflicted with your chosen career. Retirement might be a good time to give that interest a chance.
Reasons not to go back to work after retiring:
Mental or physical strain
While working after retirement can help with mental health in many cases, that doesn't go for everyone. Work can be demanding on the mind and the body, depending on the job. If you've made it to retirement, you've earned the right to rest without the stress. Don't go back to work if it's too taxing on your well-being or your health.
You have plenty of money
As discussed above, there are a variety of financial reasons to go back to work after you retire, but if finances aren't a concern at this point in your life, perhaps the alternative suits you. If you have plenty of money to last you the rest of your life, and you don't have any obligations that will change that, returning to work for extra income needn't be a concern.
Expenses that come with work
Even if you aren't exactly set for life, it's worth considering the expenses that come with having a job. How much will you have to pay to commute? Will you need new clothes? A new vehicle to handle that commute? Be sure that returning to work is worth the time as well as the money you may have to put into it.
More income generally means more taxes. As The Balance explains, "The other side effect of increasing your income is potentially bumping yourself into a higher income tax rate. Remember, one of the benefits of taking distributions from a 401(k) or IRA in retirement is that you are likely in a lower income-tax bracket and therefore paying less tax. Earning a ton of income in your retirement years can impact your tax rate and how much you pay for retirement account distributions."2
Whether or not to go back to work after retirement is a choice you need to make based on how your lifestyle fits with your finances. If money isn’t a major concern and you’d find more enjoyment in leaving the working world behind, perhaps truly committing to retirement is the right decision. Otherwise, there are plenty of benefits to putting in a little more time.
1. For an article on how working after your Social Security “full retirement age” can affect you, visit nsbank.com/financialplanning
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A. Member FDIC