Over the years of meeting with people to help them plan out their retirement strategy, you tend to see a little bit of everything. In the process, I’ve learned a few things that can benefit others.
One of the things I’ve learned is that there are basically three types of retirees:
- Those who have a working retirement
- Those who must continue working in retirement; and
- Those who get to work in retirement.
I’ll get to my brief descriptions of these different types of retirees shortly but suffice it to say, there is a big difference between working because you want to and working because you have to. The latter tends to come with a little more stress than the other two and quite typically involves trading time and talent for a paycheck in a job that most don’t find very satisfying but which is necessary in order to survive. And while there are a few individuals that may fall into hybrids of these types above, they are the exception and not the rule.
According to a New York Times article, nearly a third of adults aged 65-69 are remaining in the workforce, and one-fifth of those 70-74 continue working. Two-thirds of working retirees have full-time jobs, as defined by the Bureau of Labor Statistics, working at least 35 hours per week. The labor force participation rate for the oldest segments of the population is expected to increase the fastest in the ten years between 2014-2024.
Why are more retirees working? One of the reasons is simply that people are living longer. According to the U.S. Census Bureau, as a percentage of the population, the number of people living past 90 has almost doubled since 1980 and is expected to double again by 2050. People are living longer because they are in better health and benefit from modern advances in medicine, over previous generations of retirees.
The increase in longevity along with healthier older adults undoubtedly contributes to staying in the workplace longer.
Let’s look at the three types of retirees and the major differences between them.
A Working Retirement
Those who have a working retirement are simply those who planned well, saved well and controlled expenses. Their retirement is working for them because they have worked a retirement plan.
While this may sound simple, that doesn’t make it easy. The discipline to do this tends to be a little bit harder to execute on the front end for people in our culture who have been trained to expect immediate gratification. But, it’s far better to put in the discipline needed to save and invest now than to be putting in the discipline required to get up and show up for a job every day for the duration of retirement, as required by those in group two.
Working in Retirement
Group two are those who must continue working in retirement and are typically (but not always) the opposite of number one. Sure, occasionally life throws some people a curve ball that is simply unavoidable. However, most of the folks in group two are simply there because they gave no consideration prior to retirement as to where they were going and how they were going to get there. In other words, they didn’t have a plan.
This is a stressful place to be entering retirement. It’s not all negative as I’ll state below but it’s also not optimal. Individuals in this situation don’t have a lot of choices.
Getting to Work in Retirement
Group number three is really where I believe it’s at. They have typically exhibited the same amount of discipline as group one but instead of hanging up the spurs, hopping in the golf cart and sipping Margaritas into the sunset…not that there’s anything wrong with that picture…they opt for a different type of working retirement. They are now working because they want to, from a desire to stay active or fulfill a purpose or an internal calling or just to have fun and try new things. In other words, they have plenty of good choices.
There’s nothing wrong with taking it easy in retirement. But, there are many advantages to working into your retirement years as several studies have shown.
According to the American College of Financial Services, here are just a few of the positives to be gained by adding just five years to a typical retirement age, going from 65-years-of-age to age 70:
- Increased likelihood of enjoying a sustainable retirement… going from 49% for individuals at age 65 to 85% for individuals at age 70.
- Increased Social Security benefits by deferring till 70.
- More time for savings to grow
- Enjoying better physical and mental health, as well as a death rate 11 percent lower than those who did not work.
- Remaining on employer-subsidized healthcare, which can be more affordable
Ultimately, you have to decide what’s best for you and which of these retiring groups you’d like to be a part of. There can be positives to working longer no matter how things turn out. However, honestly ask yourself, how much preparation have you done? Many people spend more time picking their cable TV package or re-arranging their sock drawer than evaluating their financial future? What about you?
Which of the three retirees I mentioned above do you believe describes your situation? Are you prepared to possibly live into your 90’s?
If you haven’t started yet or even if you’ve started but would like an independent second opinion, we’d like to help answer the questions you may have and provide clear direction for your retirement.