Many Americans are casting off the idea of a traditional retirement in favor of an “encore career.” Rather than hanging up the work hat and picking up crochet hooks or golf clubs full time, millions of older workers are choosing to work longer and take on a new career after their first comes to a close as early as age 50.

Some choose to stay in the same vein of work and perhaps become a part-time consultant with flexible hours that allow for traveling and spending time with family. Others still may choose to go back to school and start up in an entirely new line of work. There is no right or wrong way to do it so long as you’re accomplishing your goals and considering all the pros and cons.

What’s the Appeal?

Choosing to continue working into “retirement” is typically motivated by either financial incentives or a desire to stay active and keep a sharp mind in the later years of life. If you don’t have enough saved up to retire and maintain a lifestyle you’re accustomed to, continuing to work a potentially lower-stress and lesser-commitment job may afford you both financial and personal flexibility to enjoy traveling and spending time with family.

Working in retirement can also give you a chance to give back to the community through volunteering or working in the nonprofit sector if money isn’t the motivating factor. Or you can have the opportunity to try something new you might’ve been interested in for much of your life but lacked the financial flexibility to explore.

Positives

Your reasons for considering an encore career will determine which of the pros are more important to you, but they fall mostly into financial and social benefits:

Financial

Increased income that can boost your quality of life through cash flow for more vacations, hobbies, or even health care
The ability to continue saving in retirement accounts, whether it be through a new employer-sponsored plan or potentially in an IRA or Roth IRA
Increased Social Security benefits if you can afford to delay your payments—waiting until age 70 to start benefits will result in a benefit that’s 132% of your full retirement payment
Access to employee benefits through work such as disability insurance, health insurance, and retirement plans

Social

Structure and stimulation in your daily life
Sense of purpose when you wake up each morning
Daily interactions with coworkers or customers
The chance to fulfill a goal and try something new you’ve had your sights on

Considerations

While there are many potential benefits to an encore career, there are, of course, some drawbacks and potential consequences to be aware of. The main negatives are a possible strain on your health if working a physical job, increased stress levels, and less time to spend doing the things you want. There are also some financial considerations to keep in mind:

Impact on Social Security

While I noted above that delaying Social Security will increase your payments, not everyone has the flexibility to wait. For those collecting before full retirement age, earning income can decrease your Social Security benefit.

Impact on Taxes

Once you reach age 72, you must withdraw required minimum distributions (RMDs) from some of your retirement accounts. Adding these on top of Social Security benefits and a salary can have tax implications that might not be obvious up front and that can lessen the positive impact of your income.

Before RMD age, you must still consider Social Security taxation, as up to 85% of your benefit may be taxed.

Federal Employees

If you’re a former federal employee, the above points should still apply to you, but you may also have some unique concerns regarding your CSRS or FERS payment. This is something our Bethesda-based financial planning firm helps our federal employee clients understand so they can make informed decisions about their encore career.

Your federal pension will not be impacted by continued work, whether you do so through the government as a “rehired annuitant” or in the private sector. The caveat here is that, if you’re receiving the annuity supplement before age 62, the supplement can be limited by your earnings.

Job Options

Looking further into the kinds of jobs available may help you to make a decision. Find your niche, consider turning your hobbies into something you can profit from, and explore job boards.

Brainstorm the skills you’ve acquired through your years working and think about how those can be applied to the multitudes of options available. Maybe you’ll land in the same field as a consultant, or maybe you’ll take some of your core skill set and apply them to a new career.

Be sure to brush up your resume and familiarize yourself with current search avenues such as job sites and LinkedIn. If you need an education refresh, there are many low-cost solutions such as free online courses or community college classes. Get up to date on industry trends as a defense against ageism.

Search Resources

If you’ve decided to continue working, you’re now faced with the sometimes-daunting task of finding work. Some job sites are marketed toward a particular audience, such as for former government employees.

AARP is a valuable resource for most people at this stage in life. You may also consider working with a recruiter who will be able to help you find the right fit.

Ultimately, the decision on whether to continue working past retirement is one you shouldn’t take lightly. Consider your why, financial impacts, and how long you’d like to keep it up. Have a talk with your family members and, if married, with your spouse. You’ll want to consider whether you and your spouse have a similar vision of retirement.

Working with a financial advisor and a tax specialist can help you to realize the impact of the extra dollars earned and help you feel secure in your retirement planning decisions.

Discuss your situation with a fee-only financial advisor.

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