By James O'Brien.
Recent research shows that 47% of retirees say they end up working or they plan to work after retirement. And that's not just a post-recession necessity: some 72% of retirees polled in an Age Wave/Merrill Lynch report said they want to keep working after retirement.
"Were at a tipping point," according to the study, titled Work in Retirement: Myths and Motivations. "A majority of people will be continuing to work after they retire often in new and different ways."
And so, is the concept of retirement waning entirely? Also, what roles will investments and savings play in this process, if these changes do occur?
Let's take a closer look. We'll identify not only a number of driving factors but also the potential for this new workscape to change the way we understand retirees and the financial/personal approaches they're taking to what have traditionally been post-employment years.
A New Retirement Model
First, let's turn to how post-retirement, second-phasecareers manifest. Consider the following four-phase retirement model for the working retiree .
What's motivating this shift toward preparation, break, resumption, and then leisure? More than one factor, it turns out. Retirement is deeply connected to the financial realities of the 2000s and 2010s (and what will come next, too), but it is also evident that ambition, obligation, and social impulses are in play.
Roots of the New (Non-)Retiree
In some categories, only 4% of the polled retirees said they felt financially prepared for post-work years. And in the best-case categories, only about half said they felt that way.Of course, these are generations and individuals acutely affected by the 2007 - 2009 recession.
The point is, when a report tells us that 72% of retirees or near retirees want to keep working after they step away from their present careers, to a significant extent the reasons for that desire are financial. For those who saw their retirement instruments take a hit, 2007 - 2009, that's one possibility. But there are other factors in play as well.
'Retire-preneurship' and Retiree Motivations
In some cases, key to the shift in stated retirement intentions is what we can characterize as the psychology of aging workers.
That is, post-retirement employment can dovetail with personal motivations; it's not always about the cash needed to fund post-work years.
But then, money again rears its head.
When it comes to funding retirement income, 28% said they'd need the wages from post-retirement jobs to pay their ongoing bills.
Sea Change: Thinking About the Future
What we can say for certain is that the traditional concept of save-invest-retire-withdraw is undergoing a transformation. Retirees either need, or want, to return to work after a break in their career paths.
When they do, some 58% of them embark on an effort different from what they did at their previous jobs. And by the time Millennials retire, it's probable that some 26% of their income will originate from this kind of employment as opposed to the 5% post-retirement work represents to the Silent Generation and the 17% it accounts for among Baby Boomers.
That might not be enough to significantly alter the way we approach asset portfolios, but for future generations who keep working after 65 - 67 years of age, it will almost certainly have an impact on early-stage income needs and withdrawals not to mention an impact on what we often think of as an acute period of intense investment, the decades of an individual's 40s and 50s.
Bottom line, paradigms stand to shift if more workers are preparing for a second career rather than outright dependency on savings and returns.
And if the second career comes with benefits? Then post-retirement workers stand to augment healthcare costs to boot. This could mean changes in the assisted-living and elderly-housing sectors, with working retirees commanding greater resources in terms of paying for their homes and medical expenses.
The numbers suggest a sea change is underway. We're often no longer really retiring, in the long-established sense of it, even if we still think we are. And we may well find retirees moving further along this path, redefining post-career work and its consequences in the decade to come.
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