Working in Retirement

Key Takeaways:

  • Savings shortfalls, longer lives, fulfilling jobs or investing fears are some of the factors that may contribute to the increasing number of Americans continuing to work in retirement.
  • Social Security retirement benefits may not always be sufficient for your financial needs—be sure to understand when and how taking Social Security will affect your situation.
  • Investing can be a critical piece of your retirement planning. Don’t underestimate how much growth you may need.

How do you envision your life after you retire? At a tropical resort soaking up the sun? Or at a job earning income to build up your savings? Are you collecting passport stamps or paychecks? Perhaps you plan to continue working after retirement either as an employee holding a part-time job, or as an employer running your own business. If you plan on remaining in the workforce to maintain an income stream, then you are among a significant number of Americans who plan to do the same.

According to data from the US Bureau of Labor Statistics, in 2018 over 10 million individuals over age 65 were participating in the labor force.[i] In 2008 that number was around 6.2 million.[ii] Will you plan to be a part of this group of working retirees?

Financial Pressures and Longer Lives

Savings shortfalls may be to blame for some delayed retirements. Consider that less than 40% of working adults believe their retirement savings are on track.[iii] Additionally, 25% of adults state that they do not have any retirement savings or expected pension benefits.[iv] For these individuals, working in retirement may not be a choice. Some may not retire at all if they need income from a full-time job.

Other retirees may have savings, but still need some earnings to supplement their investment portfolios or retirement benefits. Rising life expectancies can partly explain the need for additional income.  According to the Social Security Administration, the average 65-year-old woman can expect to live past age 86 and the average 65-year-old man can expect to live to age 84.[v] And these are just average life expectancies—many retirees will live longer! This may be longer than some currently working individuals planned for—leaving them with a retirement income shortfall.

Working vs. Retiring

How will you address a potential retirement funding shortfall? Some individuals may choose to remain on the job at their current employer. Others may be able to find a second career or part-time work. However, if you still have time before you retire, you can take a number of steps to better prepare your financial situation.

Calculating your present and future expenses allows you to see if your expected retirement cash flow matches well with spending. Make a list of what you spend money on now and what you will likely need or want to spend money on later. Take into consideration anticipated sources of retirement income like Social Security, pensions or other retirement benefits.

You might find that you need to continue working for a couple more years to have the comfortable lifestyle you imagine. You may wish to work full time for a few extra years or see if your employer can provide part-time work.

A good savings strategy can afford you the liberty to work while you are able and willing, and retire when you choose. Most of all, a good savings strategy can help you avoid having too little money to fund your retirement when you finally decide to leave the workforce.

Working in Retirement and Social Security

Social Security benefits are a significant part of income for many retirees. Whether you are planning to work after you retire or not, understanding the nuances of taking Social Security benefits is important.

First, consider your full retirement age. This is based on your birth year.[vi] If you decide to take Social Security benefits before this age, they will be permanently reduced. If you delay taking benefits beyond your full retirement age, up until age 70, you can receive a permanent increase in benefits. Some working individuals may find that staying at a job and delaying taking Social Security may be more beneficial for their financial situation.

However, if you decide to begin taking Social Security benefits and continue working, whether part-time, full-time, or as an business owner or employer, be aware of the effects. If your earnings are beyond a certain yearly limit while you are under or at full retirement age, your retirement benefits may be reduced.[vii]

Investing for Retirement

Some investors may postpone retiring, or continue to work because they are nervous about the stock market, or are concerned if their investments will provide enough to live on.

Some investors may be relying on bonds or cash for their retirement savings. These individuals may be fearful of stock market volatility or the potential of a bear market. However, over 5- and 30-year rolling periods, stocks have historically returned more than bonds.[viii] Consider that US stocks’ average annualized return is almost 10%.[ix] This includes bear markets. If you need growth in your investments to provide over a potentially long retirement, staying out of stocks could do more harm than good.

If you are planning to hold your savings in cash, don’t overlook inflation’s impact. Inflation has historically averaged around 3% in the US.[x] If inflation rises in the future, cash loses purchasing power. This means that although your current level of cash may meet your needs now, it may not in the future.

Fear shouldn’t stop you from investing in stocks, particularly if you need equity-like returns to fund your longer-term goals. Your unique financial circumstances will determine the right asset allocation for you. But often, those hoping to avoid working in retirement likely need some growth.

The right investing approach coupled with an asset allocation that fits your goals can help your control your retirement destiny.

How Fisher Investments Can Help

Achieving the retirement you envision isn’t always easy. You may want to work for fulfillment or enjoyment, or you may need to work to boost your savings. You may want to retire as soon as possible, or you may wish to work a little longer to be able to achieve your goals.

No matter where you are on your journey, staying educated is critical. All of these factors can be confusing. If you need any help with your retirement planning, contact us today. We may be able to help.


[i] Source: Bureau of Labor Statistics, as of 09/30/2019. Civilian labor force participate rate by age, sex, race and ethnicity.

[ii] Source: Bureau of Labor Statistics, as of 09/30/2019. Civilian labor force participate rate by age, sex, race and ethnicity.

[iii] Source: The Federal Reserve, as of 09/30/2019. Report on the Economic Well-Being of U.S. Households in 2018 – May 2019.

[iv] Source: The Federal Reserve, as of 09/30/2019. Report on the Economic Well-Being of U.S. Households in 2018 – May 2019.

[v] Source: Social Security Administration, as of 09/30/2019.

[vi] Source: Social Security Administration, as of 09/30/2019.

[vii] Source: Social Security Administration, as of 0930/2019.

[viii] Source: Global Financial data, Inc., as of 01/09/2019. Average rate of return from 12/31/1925 through 12/31/2018. Equity return based on Global Financial Data, Inc.’s S&P 500 Total Return Index. Fixed income return based on Global Financial Data, Inc.’s USA 10-year Government bond Index.

[ix] Source: FactSet, as of 01/10/2019. Annualized S&P 500 Total Return from 12/31/1929 – 12/31/2018 was 9.5%.

[x] Source: FactSet, as of 02/25/2019. Based on US BLS Consumer Price Index from 12/31/1925 to 12/31/2018.

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