Not so long ago, the whole idea of working in retirement1 was not even a consideration for most people. Now, it's a reality.
In contrast to the declining trend of the youth labor force, the number of workers aged 55 years and older in the labor force grew from 15.5 million in 1994 to 33.9 million in 2014. This trend is expected to continue; by 2024, "The Bureau of Labor Statistics projects that 25% of the American workforce will be over 55".2
There are many reasons why people continue to work well past their parents' "normal" retirement age. For many, the financial need is real. According to the Fidelity Investments® Retirement Savings Assessment (RSA),3 55% of American households are at risk of not covering essential expenses—like housing, health care, and food—in retirement. Working longer or part-time in retirement can help cover the financial gap.
Even if you have saved enough to retire comfortably, you may find that working for pay in retirement can help provide a safety net. It helps stave off dipping into retirement accounts and may even allow you to keep contributing to retirement savings. The pay can also help provide a cushion so you can delay tapping into Social Security until age 70, which would give you a nearly eight percent annual bump in Social Security income versus retiring at your full retirement age (FRA). Additionally, the funds can help cover some of your medical bills not covered by Medicare.
Like other major life changes, transitions to another career don't happen overnight. "Successful career shifters typically set flexible time frames of three to five years to move into a new field," says Kerry Hannon, a Washington, D.C.-based career expert and author of Great Jobs for Everyone 50+: Finding Work That Keeps You Happy and Healthy... And Pays the Bills. "Finding what you want to do next is a process. You may try out a few things before you find the right path. Start planning at 55 for what you might want to shift to at 60."
In search of an encore career
Some of us are blessed with careers we love, and fortunate enough to be able to continue in them. But many others, especially Baby Boomers, have seen their primary careers come to an end. This has led to the rise in so-called "encore careers" where people pursue new interests, often in service to the community. According to a 2014 survey from Encore.org, a San Francisco–based organization that helps older workers leverage their skills and talents to improve the world, more than 4.5 million Americans aged 50–70 identify themselves as working in encore careers (jobs or volunteer work with a social impact). Another 21 million are considering doing so.4
"We see a surge in encore careers among retiring Baby Boomers, driven by a desire for a paycheck, a passion, and a purpose," says Marc Freedman, the founder of Encore.org.
Percentage of people earning a salary or volunteering in encore careers
Some of the 4.5 million people already in encore careers are volunteering, but a large percentage are earning a salary or working as entrepreneurs, as the graph shows. On average, they are spending 21 hours per week in their encore careers.
Become a "consultant" in your field as you transition to retirement
If encore careers don't interest you, consider a more traditional approach: becoming a consultant. "One path to getting a job after age 50 is consulting and part-time contract work in one's previous line of work," advises author Kerry Hannon. "Tap into your network. Let people know you’re looking for temporary assignments. Your last employer might be a great place to start to look for consulting gigs."
Hannon shares four tips on becoming a consultant after your primary career ends.
- Become a member of a local industry association or organization. Join industry groups on LinkedIn. Attend industry and professional meetings and conferences. Keep an eye on the association job boards and let other members know you're seeking consulting assignments.
- Contact your local Chamber of Commerce to help you reach small businesses in your town. These organizations often don't have funds to hire someone full-time, but may need your expertise and experience. Also check out temporary agencies that specialize in placing experienced professionals in short-term gigs.
- Know your rates. Research what other consultants in your field charge. Many consultants have websites where they publish set rates or a range. You might also ask fellow consultants straight out what they charge. Whatever your source, set your rates accordingly based on your experience and skill set.
- Market your services to nonprofits which have a mission that resonates with you. They often hire project-based or contract professionals. Consider offering your services pro bono to develop your relationship and gain references for future jobs.
If you are a mid- or late-career worker, it's not too early to start mapping your next move. But how do you know if working in retirement is right—or even possible—for you? The answer depends on several factors: your age, your health, and your personal goals. Here is a framework to help you begin thinking and planning for how work might fit into your retirement.
Mid-career: If you think you'll need or want to work in retirement, now's a good time to start imagining what you would like to do. Continue in your current job? Launch a business? Volunteer? Freedman says creating an encore career "really begins with getting the time frame right, and recognizing that this is not a retirement job or a bridge job, but is likely to be a whole new phase of your life, and it's not likely to be without bumps in the road, and setbacks." So the earlier you can start planning, the better. Just don't stop saving, because you never know whether you are actually going to be able to work.
Preparing for or already in retirement: By this time, you should have a clearer picture of whether you will need or want to work in retirement. Make sure to weigh the pros and cons of leaving your current job. What impact will that have on your retirement savings and health care coverage? Are you emotionally ready to leave? Are there risks you may outstay your welcome at your current job? What other kinds of work might you like to do?
Ideally, before you retire, you should test your plan. "Roll up your sleeves and begin experimenting," says Freedman. "Try on different kinds of roles, whether it's through consulting, or volunteering, or serving on boards. But be as hands-on as possible. Try before you buy. This is very important."
Also, keep in mind that you may have health issues in retirement, or need to provide care for a loved one. This is often the primary reason why many people are forced to retire early or reduce their hours.
Finally, when you do retire, consider taking some time for yourself, if you can afford it, before you jump into your next chapter. "Think of it as a 'gap year' for grownups," says Freedman. "Use the time to step back, rest up, and begin experimenting with new options." You’ve earned it! Some time to recharge and reassess your goals and options will help you in whatever you choose to do next.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917