“Unretiring”: Why Recent Retirees Want to Go Back to Work

Judith Ward September 27, 2023 23:01

When COVID-19 sent the economy into a tailspin in 2020, it resulted in 2.4 million excess retirements, according to research from the Federal Reserve of St. Louis in the United States. But many of the people behind these “COVID-19 retirements,” as the Fed’s paper describes the trend, have since headed back to work, choosing to “unretire.” Approximately 1.5 million retirees had re-entered the workforce by March 2022.

The pandemic may have created an unusually large wave of retirees leaving and returning to the workforce, but the trend of working in retirement is going strong. According to T. Rowe Price’s recent Retirement Saving & Spending Study, around 20% of retirees are working either full time or part time, while 7% of respondents report looking for employment. The study looked at how and why retirees choose to work and found that there are a variety of benefits and motivations. Many retirees either choose to work or need to have work be part of their retirement lifestyle. This decision can have many powerful positive effects, not least of which is financial well-being.

Why Retirees Choose to Work

The reasons many retirees return to work come down to their retirement lifestyles and financial lives. In fact, roughly half (48%) of those working in retirement felt they needed to work for financial reasons, while a similar portion (45%) chose to work for social and emotional benefits. It stands to reason that many retirees see part-time work as a good transition strategy into retirement.

According to our research, overall, 57% of retirees want to continue working in some form, while 43% would stop working all at once. This varies by wealth. Meanwhile, the survey data indicated that retirees who are working full time are most often motivated by the desire for mental stimulation and professional fulfillment that they find in their work. They may especially appreciate the opportunity to work on their own terms, rather than out of sheer necessity.

Motivations also vary along gender and marital lines. Women and single retirees are more likely than men or married couples to cite income as the primary motivator for working in retirement. Many single people also found work to be a good use of time in retirement. Men, in particular, were more likely to cite social connections as motivation to work.

The Many Motivations to Work in Retirement

Gender, Work Status, and Marital Status illustrations reflect two answer options out of nine. Respondents could choose all that apply therefore the results will not total 100%.

Returning to work doesn’t always mean returning to a previous career or work arrangement. Many people choose new vocations or part-time work in retirement. They may explore causes or fields that align with their passions and build on their professional experience, perhaps via consulting arrangements. Others take advantage of remote work, part-time work, or flexible arrangements to achieve a work-life balance that suits their new life stage.

Working Longer Is a Powerful Way to Strengthen Your Retirement Plan

Whether people unretire or simply stay in the workforce longer, some of the largest financial benefits of additional years of work are delaying retirement account withdrawals and delaying claiming Social Security benefits. These actions essentially shorten the amount of time your assets will need to support you in retirement. Even a few additional years of income have a positive effect on the probability that you won’t outlive your funds.

Consider the hypothetical example of a 62-year-old who earns US$100,000 per year, has US$900,000 set aside for retirement, and expects to spend about US$63,000 per year in retirement. If she retires this year, there is a 68% chance that she will not outlive her funds in retirement, based on projections generated by the T. Rowe Price Retirement Income Calculator. The likelihood of not outliving one’s retirement funds is what we refer to as the “probability of success.”

If she delays retirement by just a few years (until age 65), however, her probability of success rises to 91%. Waiting until full retirement age at age 67 increases that probability to 97%. Having additional years of earned income can also give workers more time to contribute to their savings, especially since many workers are likely eligible to make catch-up contributions at this stage of life.

If you’re considering unretirement, examine how doing so could affect your Social Security benefits and look for opportunities to improve your financial situation over time. In addition to increasing your financial stability, rejoining the workforce can be a powerful way to make social connections and find purpose—worthy goals no matter your circumstances.

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Judith Ward

T. Rowe Price Thought Leadership Director