Reverse Retirement ? The New Trend in ?Retirement?

It?s rare to go into a big box retail store or a fast food restaurant and not see one or more older people somewhere on staff. While we might think Isn?t that nice, he/she is supplementing their retirement income, there may be a bigger story playing out here. An article in Yahoo! Finance (One-third of retirees end up getting full-time jobs) last fall even confirmed the phenomenon has a label ? reverse retirement.

Once a development reaches the point where it has a name, you know that it?s become something real. We see it all around us. It?s not just in retail and restaurants either. A few weeks back I saw a woman ? clearly well into her 60s ? driving a delivery truck. I saw a man ? who wasn?t under 70 ? delivering furniture to an apartment complex.

Reverse Retirement ? The New Trend in ?Retirement?
Reverse Retirement ? The New Trend in ?Retirement?

Even the optimist in me has trouble imagining people doing such jobs at that age for any reason short of survival.

The Reverse Retirement Drill Down

According to the Yahoo article, fully one third of retirees who re-enter the workforce take full-time jobs. It also noted that half of retirees are holding part-time jobs.

But there was another revelation that struck me as more interesting. The article states that reverse retirement is higher for workers in the highest and lowest income quintiles. It speculates that the lowest quintile is working for additional income, while the highest quintile work because of the ?opportunity costs of staying at home are too high?. Translation: the high cost of living. Yes, even in retirement.

The Yahoo article isn?t the only major media post on the subject. There’s also Reverse Retirement: Find Out Why So Many Retirees Are Going Back to Work and Reverse Retirement: Are You Prepared? And if you?re interested, there?s now even a reverse retirement calculator to help you work out the numbers.

I guess this means I?m late to this party, or at least to the naming ceremony. It?s one of those things that you see all around you, but you don?t fully appreciate until you learn that it has a name.

It does. And I suspect that?s because it?s a growing trend. Maybe the biggest ?retirement? trend of the future.

And that?s something we can and should prepare for.

The Reality of Reverse Retirement and How It?s Usually Ignored

One of the issues I find particularly intriguing about the whole concept of reverse retirement is discovery after the fact. I?ve noted in different articles on this site the common tendency of people to retire, only to return to the workforce two or three years later. This is probably a lot more common than any of us realize.

As people near retirement age, the rose-colored glasses are donned. They have a Social Security check, maybe a small employer pension, and the availability of savings, either from dedicated retirement plans or from taxable accounts.

Even if they have doubts about their ability to survive, optimism wins the day. They retire and assume it will all work out…somehow.

I suspect reality begins to creep into the picture as the savings balances decline. At that point, you come face-to-face with the limitations of your retirement income. The $2,753.22 in monthly retirement income suddenly doesn?t look like enough. You then do what you’ve been doing all of your life ? you head out to look for a job.

But perhaps the better strategy is to be more realistic about our retirement prospects from the beginning. That starts with avoiding overly optimistic assumptions. After all, what we?re talking about here is future survival. Too much optimism is never well advised with that topic.

Avoiding Reverse Retirement with Alt-Retirement Strategies

I?ve devoted a significant amount of blog space to this topic over the years. The whole concept of retirement is changing. We can either anticipate those changes by preparing for them, or we can ignore them and get run over by them.

Alt-Retirement is all about preparation. Instead of retiring on a shoestring, and assuming all will work out, it?s best to take a more pessimistic approach. That’s actually not negative either. It?s about preparing for the worst, so the worst won?t happen.

We all have different ideas of course, but my thinking is that it’s best to incorporate some form of earned income into the retirement mix. That?s preferable to retiring, settling into the work-free lifestyle, then being greeted by the rude awakening of having to go back to work.

I suspect that a lot of people are forced into full-time work because the realization that they can’t actually afford to retire is delayed past the point of no return. Where you might have the option of working only part-time from the very beginning, full-time becomes necessary due to the drain down of savings.

That?s the outcome we should be trying to avoid.

There are two intractable realities that most retirees will have to deal with, either immediately or eventually. The first is that Social Security benefits will probably be less than you expect. The second is the inflation affect. Inflation is both relentless, and largely hidden, but it?s absolutely toxic to retirees. It?s the factor that guarantees that all but the wealthiest retirees will eventually run out of money.

The Pessimistic Way to Avoid a Pessimistic Outcome

The best way to avoid the worst outcome is to assume it, then prepare for it. That last part is what?s most important. Merely assuming the worst, then dragging your knuckles under the assumption that all is lost is negative energy and a complete waste of time.

Here?s how we can avoid the reverse retirement dilemma with some advanced preparaton:

  • Unless you reasonably expect to have a seven- or high six-figure retirement portfolio, put the idea full-time retirement out of your head.
  • Ditto and especially for early retirement. For most, that will be a guaranteed ticket to reverse retirement.
  • In making your retirement plans, never, never ignore or underestimate the cost of health insurance. Adding a Medicare supplement to Medicare is now virtually a requirement.
  • Don?t become a slave to your current lifestyle. The last thing you need to do during the last years of your life is to spend time supporting a high suburban lifestyle.
  • Begin living beneath your means, even if you?re years away from retirement. The less money you need to live, the less income you?ll need. It may be the difference between working part-time, and needing to work full-time.
  • While you?re living beneath your means, become fanatical about saving money. Even if you can?t save enough to fully retire, anything you can save will make life that much easier.
  • Get out of debt, and stay out. I suspect many reverse retirement situations are driven by debt, more than by general cost of living requirements.
  • Get involved in networks that might be able to provide you with needed services. In particular, anticipate work-arounds for long-term care
  • Choose the work you?ll do in your retirement years, rather than letting it choose you.

Final Thoughts on Reverse Retirement

If you acknowledge the reality of reverse retirement as a real thing in this day and time, you may be able to avoid the worst effects of it. That?s important too. So much of our attitudes about life revolve around emotion. If we go into a situation with a sense of control, we?re happier than when circumstances dictate our course.

If we accept the reality that retirement is changing, we can change with it, and produce a better outcome. If we ignore it, we’ll end up like those who retire with heavy-duty rose-colored glasses, and end up coming back into full-time employment a couple of years later. I’ve seen it, and I’ll bet you have too.

There?s yet another factor here that may be even more important. If you?re forced into a reverse retirement situation, you may well find yourself doing a job that you absolutely hate. Even if the best you can do is semi-retire, it will go much better with you if you do work that you actually like. That requires advanced planning.

From what I can see, retirement is no longer about life in blissful nothingness. It?s now mostly about creating a more compelling lifestyle. One that involves less stress, more enjoyment and free time, and more pleasant ways to earn a living. If we can make that a reality, then reverse retirement won’t be a factor in our lives.

What are your thoughts about reverse retirement, and more specifically, how it can be avoided? Do you have any examples of reverse retirement that you can share? Sometimes knowing some bad examples can provide us with the motivation we need to go in a healthier direction.

( Photo by kevin dooley )

11 Responses to Reverse Retirement ? The New Trend in ?Retirement?

  1. I think the reason the highest quintile cohort works after retirement is because those people are highly productive and achievement oriented people and they are not content to stop contributing to society. I’m one of those with zero need for money but the nonpaid charity work I do, while important, isn’t as fun or as fulfilling as the paid side gigs I set up imediately upon retiring. I am good at making money and I enjoy it so I work a couple of days a week and earn 100% of my family’s expenses leaving my retirement investments untouched. And I’m much happier keeping a toe in the water than feeling like I’m sitting in a rocking chair.

  2. Hi Steve – I agree with that. When I worked in public accounting I noticed that self-employed people don’t retire, at least not totally. If you like what you do and you’re good at it, you just keep going. That’s certainly what I plan to do. I’ve also noticed that as I get older I have this incredible need to be relevant. The idea of kicking back to do nothing (or something close to it) doesn’t appeal to me. I love Jason Robards comment near the end of the movie Parenthood, when at age 64, he declares that “there is no finish line” in life. I can see that. But I think it’s become a cultural norm to see retirement as an imaginary finish line.

  3. Hi Kevin. Yes, I know an example. I know of a person who had a very good military career and “retired” after 22 years with full medical benefits for he and his wife for life plus a $5000/month pension. He quit working for the military at 62 y.o. One would think that this family of two could live on that money for the rest of their lives; but, sadly, this is not the case, and he had to return to work. They never saved anything, remortgaged their home time and again and took the equity to do upgrades on the house, which is now too big for them. He has had several part-time jobs because they didn’t work out for one reason or another. He just didn’t like the work, and I can’t blame him when he explained what the job entailed. So now, in their late 60’s, they have no equity to get out of their home, no savings to fall back on, and the $5000 doesn’t cut it for them. They can’t sell the house to buy another because he has credit card debt he can’t get out of, and they’re stuck in a house they can no longer afford or care for. They have no down payment for another one. She never worked, so no help there. No SS because they were military. Sad situation. It all goes back to choices made 25 years ago, and we all know what those are. So, he now has to work part-time, and he’s tired, and life is catching up with him physically and mentally, as it eventually does to all of us. I don’t know how long he will be able to work, but I know it’s not work he likes. I like this person, and all I can do is wish him well and say a prayer that life gets a bit easier for him. Reverse retirement can be a good thing if it’s planned for and it’s work you like, but this is always the case.

  4. Hi Bev – Thanks for sharing that example, it’s really a good one. It’s weird – this guy’s situation could have been a good one. To get a $60,000 a year pension he had to be earning pretty good money during his working years. And of course, if you’re in the military or working in government you have a much greater degree of career/job security. You also have the best health coverage. In theory, that should set the stage for saving and investing money throughout your working years, not the least of which since they also have solid employer savings plans.

    But the opposite is possible too, and seems to have happened in this case. With that much stability, and the promise of a $60,000 pension complete with health benefits, he probably figured he had nothing to worry about. That set the stage for NOT saving money, and for going into debt. That’s the “kept” mindset. He was so well cared for in his high security job that he thought he had nothing to worry about, ever. This is the fundamental problem in thinking “they have me covered”. But “they” are an illusion, and we’re ultimately responsible for ourselves.

    An occasional bout of difficulty does much to keep us focused and in the real world. I suspect he didn’t have enough of that. We should consider ourselves blessed that life hasn’t been so easy. Adversity makes us better prepared for the unknown. This couple are trapped in golden handcuffs.

  5. I can’t tell you how true that kept mindset is. I have a similar background as this man above but a totally different result.
    This is a very real thing. I can write about a 1000 examples of very similar stories as the one above.

    It’s awesome you recognize this. I have said this to other people and they think I’m out of my mind. LOL

    It’s scary how similar we think.

  6. Oh it’s a thing alright. I’ve seen more of it than I wish I had. People can be crippled by their good fortune. They’re also among the first to declare victimhood when things don’t work out. I’m sorry but I don’t feel any pity for people in that situation. It’s death by a self-inflicted wound.

    It’s one thing if a person had a legitimately hard life and ended up in a bad situation. But if you’ve been well cared for and blow it, it’s a self-inflicted wound.

  7. I think one reason that you see higher employment in the highest quintile is that people in that category CAN work more in later age as their jobs allow it.
    I’d say that most of the jobs that earn high income are not physically demanding and are often mostly cerebral and more often salary or self employed and thus more flexible in nature.
    Its much easier to be a lawyer at age 70 than a pipe fitter.

    Also they point out the opportunity cost of not working. By that they mean that the highest quintile has a harder time giving up that fat paycheck.
    Question: If you could make another $500,000 by just working one more year would you be tempted to do so? What if it only earned you $10,000? See the highest income earners have a lot bigger incentive to keep working because their paychecks are the biggest.

  8. Hi Jim – That’s an excellent point. I noted in my response to Steveark that I’ve noticed a trend of the self-employed not retiring. That supports what you’re saying. At the same time, I see too many elderly working in menial jobs, like greeters and counter workers – the kinds of work you only take when you’re desperate for money. So I think it’s true that high earners/self-employed continue to work past 65 but that isn’t new. The wave of elderly in menial jobs is the shift that seems to be playing out.

    But it’s also possible that high earners don’t want to quit completely because they sense things have become less stable. They may perceive this and be adjusting to the situation, which is often why they earn at the higher end of the scale. Meaning, greater ability to perceive what’s going on = higher earnings. But that’s just a guess. Speaking for myself, I’m not at retirement age, but I like what I do and don’t see myself being happier giving it up.

  9. When travelling around Australia to write the first edition of Where To Retire In Australia, we met many people who had retire, not liked it or retired and wanted to do something different. They had created profitable hobbies and home based businesses. We wrote up 101 case studies: ?Retire Bizzi?.
    There was a variety of enterprises people were involved in….one man and his wife ran a ?locum management business?. (Looking after businesses when owners were busy/away)..they were extremely popular.
    Carol Jones, ?The Ironing Diva? sells ironing board covers, shoe bags, log luggers from her rural Australian home….She?s sold around 350,000 ironing board covers…..the list goes on.
    Amazing ?Unretired People?

  10. Hi Jilly – I think most people are more dynamic than they realize. Especially those who are able to retire early. They don’t realize the same forces that drive them to early retirement are also strongly oriented toward accomplishment. A life of doing nothing isn’t in their nature. It seems based on what you’re describing, most have moved into entrepreneurial activities, which proves the point. For these people, retirement may work only as theory. Otherwise it’s just a bridge to the next adventure.

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