A New Retirement Paradigm: The Encore Career

By Christopher Young, CFP®, CPWA®, CMFC®

Whether it’s out of necessity or a desire to simply to stay active, intellectually engaged, or inspired, working in retirement is quickly becoming the norm

Advancements in modern medicine have substantially increased life expectancies, and as a result, people are living longer, healthier lives. Thus, there’s a good chance retirees will spend more time enjoying retirement. However, the definition of what retirement looks like is changing. While most retirees plan to spend their post-work years traveling, volunteering, spending time with grandchildren, or improving their golf game, many are energized by discussing their “next act” in terms of work – their encore career.

While the idea may seem counterintuitive, encore careers are becoming increasingly popular in retirement. According to a study by CareerBuilder, nearly 60 percent of workers who are age 60 or older anticipate looking for a new job after retiring. Whether it’s out of a necessity to supplement retirement income or a desire to simply to stay active, intellectually engaged, or inspired, working in retirement is quickly becoming the norm.

There are several reasons why retirees are choosing to pursue an encore career. Below are four reasons why these second acts are becoming more common:

Financial advantages – Continuing to earn an income may allow for a reduction or delay in withdrawals from your savings. By remaining invested longer, you can continue to take advantage of additional compound interest. Another benefit is the opportunity to delay Social Security income and add to your earnings record at the same time. In the years between retirement and age 70, there is an 8 percent annual increase in benefits for every year you postpone drawing Social Security. However, it’s important to speak with a financial advisor who fully understands the pros and cons of the many options available in order to find the strategy that best fits your unique situation.
Bridging the gap – If you are ready for a career change but not ready to fully retire, an encore career can allow for a gradual transition. It may also ease concerns and apprehension about not feeling fulfilled during your golden years or being unsure about how you will spend your free time. I always encourage clients to meet with a life coach to help paint the picture of what their future will look like. Learn more about why this is a critical component of retirement planning here: “Why A Comprehensive Financial Plan Should Include A Life Coach”
Health benefits – Work is often beneficial for physical, emotional, and cognitive health. It offers a routine, a sense of purpose, and a reason for getting up in the morning. It is also an outlet for keeping you socially connected. According to several scholars attending the 2017 Age Boom Academy at Columbia University, work also keeps you mentally sharp by keeping your brain activated, which can lead to a longer, happier life in retirement.
Intrinsic rewards – During your traditional working years, it’s common to set aside personal interests and focus on career demands, raising kids, and helping aging parents. Encore careers provide an opportunity to learn new skills, serve the community, or engage in activities that give you a greater sense of purpose and fulfillment. The rewards are often just as much psychological as they are financial. Encore careers can allow you to pursue a passion and obtain a sense of satisfaction you might not have been able to fulfill during your traditional career.

Retirement planning is one of the most important services a financial advisor provides, and helping individuals work through both the financial and lifestyle components is essential. The old view of retirement is being replaced by a new definition that’s far more active, engaging, and rewarding. Shouldn’t that be what retirement is all about?