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 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.
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 be 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.