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Americans are starting to think differently about retirement. Factors such as longer life spans, new sources of retirement income and recent economic uncertainty have led to a shift in perception. As a result, some retirees have turned to working part time to provide both more fulfillment and financial confidence during retirement.
While employer-sponsored pension programs were common for previous generations, the percentage of all private-sector workers covered by a pension plan has dropped dramatically — from 45 percent in 1970 to 14 percent in 2011 — according to the Employee Benefit Research Institute. Many companies have replaced pensions with defined contribution programs, regularly contributing to employee retirement accounts rather than guaranteeing a certain retirement benefit.
Workers today are not only funding a larger part of their retirement themselves, they’ve also had to do so through the markets’ nosedive in 2008 and slow recovery over the last five years. On top of that, average life expectancy continues to increase and many people are enjoying up to three decades of retirement.
Some have responded by delaying retirement. In an April 2014 Gallup poll, retirees reported an average age of retirement of 62, two years older than the average age reported in 2012. However, it’s not uncommon for retired workers to enjoy a year or two of leisure upon retirement and then reenter the workforce after recharging. For many, retirement is not seen as a time of continuous and uninterrupted leisure, but rather another phase of life where one can focus on activities that bring more fulfillment, fun and flexibility — as well as additional income.
According to a Merrill Lynch 2014 study, nearly half (47 percent) of retirees have either worked or plan to work at some point during their retirement, and nearly three quarters (72 percent) of pre-retirees — defined as planning to retire within five years — plan to work in some form in retirement. Most retirees have some steady income from a combination of Social Security, retirement accounts and personal savings, allowing them more flexibility in the type of work they choose. In fact, 83 percent of those working in retirement work part time.
Interestingly, most retirees who continue to work — part time or full time — did not point to money as the most important reason to work. Sixty-two percent said the top reason they work in retirement is to stay mentally active, and only 31 percent cited money as the top reason. Many see working part time as a way to focus on their interests or hobbies, give back to the community or connect socially with others — all the while earning income to help meet expenses.
Make Working Work For You
If working during retirement is part of your plan, there are a lot of options to explore. Many retirees are self-employed, working as a part-time consultant or contract worker in their field of expertise. Others apply their skills acquired over a lifetime career to a new field of interest.
If you’d like to stay in your current field of work, one step is to let your former employer know you’re available for special projects or to help out during busy times. Joining a professional group may provide opportunities as well. You may be able to turn a hobby into an income-producing business. Photography, pottery, jewelry making, and woodworking — the possibilities are endless. You might also consider earning income by teaching your craft to others.
You can peruse existing part-time job opportunities on websites such as RetirementJobs.com, RetiredBrains.com and Indeed.com, among others. If you’re interested in exploring how working post-retirement could affect your finances, consult with a financial planner. The additional income, regardless of the source, may impact your financial goals, taxes and a variety of other factors.
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Multisector bond funds have become popular as an alternative to traditional bonds, but a closer look raises questions.
> Read the research paper.