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👴 Work or relax in retirement?

👴 Work or relax in retirement?

retirement is changing

Michael Wight, Jason Phillips & Trajan King
February 07, 2025

Retirement Download

Strategies for a successful retirement

The Changing Face of Retirement: Work or Relax?

Retirement is traditionally viewed as a time to stop working, but opinions and plans for the future of retirement are evolving.

For the current generation of retirees, the majority—71%—are fully retired, according to CNBC's August 2024 survey. However, among those still working, only 17% do so by choice, with just 11% working out of necessity.

The outlook is shifting for younger generations, with 53% of would-be retirees planning to work during retirement, either out of necessity or desire. A smaller 11% of this group intend to stop working entirely.

This shows that the dynamics are changing and people are looking at retirement in a different light.

The Psychological Benefits of Working in Retirement

For many, the idea of complete retirement may seem appealing, but it can come with unexpected challenges.

As discussed in a previous issue, many retirees struggle with an identity crisis after leaving the workforce. The transition from a structured, work-centered life can leave some people feeling aimless. As a result, many retirees opt to continue working in some capacity to maintain a sense of purpose and routine.

Whether it’s through part-time work, consulting, or pursuing a passion project, keeping a connection to work can ease this transition and provide psychological benefits. When you work, you feel more important and have goals, which keeps people satisfied.

In fact, many of those planning to work in retirement are not only doing so for financial reasons but also because they want to. Working in retirement doesn’t have to be a burden; it can be an opportunity to explore passions or hobbies in a professional setting. We have found that many retirees find fulfillment in work that aligns with their interests, leading to a more enjoyable and purpose-driven post-career life.

For some, the need for additional income might be lower than what they earned in their career. We encourage subscribers to reframe their perspective on retirement work: it’s not about replicating their former full-time income but about meeting a smaller financial need while engaging in something enjoyable. Whether it’s working part-time at an outdoor gear store or pursuing another passion, retirement work can be flexible and rewarding

Financial Benefits of Delaying Full Retirement

Delaying retirement can significantly improve financial outcomes. According to reports, 45% of U.S. households are at risk of running out of money in retirement. However, by working longer—either by staying in the workforce full-time or picking up part-time work—individuals can improve their retirement prospects. The chances of running out of money drop to 28% if workers delay retiring until age 70, compared to 45% if they retire at 65.

This means, the longer you work, the more financially secure you’d be when you decide to hang the boots. It’s self expalanatory as working longer provides several financial benefits.

For one, it allows individuals to continue contributing to retirement savings, reducing the amount needed to be drawn from these accounts once they do retire. Additionally, delaying retirement can increase Social Security benefits. We talked about delaying, including the pros and cons, in this issue.

For those born after 1960, full Social Security benefits begin at age 67, but for every year past that until age 70, benefits increase by 8%. This can result in a significantly higher monthly payout in retirement.

Finding the Right Balance Between Work and Retirement

Remember the importance of maintaining balance in all aspects of life when deciding whether to stay in the workforce. Even if you love your job, lost time cannot be reclaimed. Striking the right balance between financial security and how you want to spend the rest of your life is essential.

You need to involve loved ones in retirement planning. Many retirees look forward to spending more time with their families—whether that means picking up grandchildren from school, joining family vacations, or volunteering at school events. These moments can add meaning to retirement, especially for those who missed out on them due to work commitments.

For those not quite ready to step away from work entirely, adjusting their career approach can offer a middle ground. Options like reducing work hours, shifting to consulting, or taking on part-time roles allow individuals to maintain professional engagement while gaining more personal freedom.

More Than Just Financial Security

For many Americans, retirement falls short of expectations. While this stage of life has the potential to be deeply fulfilling, too often it is marked by isolation and a loss of purpose. One telling sign? The average retiree between 65 and 74 spends about four hours a day watching television.

Retirement isn’t a static phase—income needs and lifestyle demands shift over time. At one point, you might dedicate much of your time to caring for an aging parent. Later, your focus could shift to looking after grandchildren. Increasingly, many retirees remain engaged in the workforce, whether out of financial necessity or personal fulfillment.

Not everyone wants to work for a paycheck in retirement, and financial independence should ideally provide the freedom to choose whether to work. But just because someone can afford to stop working doesn’t mean it’s the best decision.

Financial firms often emphasize the idea that life’s ultimate goal is saving enough to retire comfortably. But is that truly what defines a meaningful life? Imagine if Bill Gates or Steve Jobs had walked away from their careers the moment they had enough wealth to live comfortably. What if a recent college graduate, when asked about their aspirations, simply responded, “My goal is to max out my 401(k), pay off my house, and retire as soon as possible”? It’s hardly a vision for a life well-lived.

Retirement should be about more than just stepping away from work—it’s about staying engaged, finding purpose, and continuing to contribute in meaningful ways.

The Changing Retirement Paradigm

As more people embrace the idea of working in retirement, the concept of "retirement" itself is changing. It's no longer about simply ceasing work; it’s about finding a balance between relaxation, continued engagement, and financial security. Whether driven by necessity or personal desire, staying involved in work after retirement can offer both financial benefits and a fulfilling lifestyle.

Here’s an interesting video we did on the topic:

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