A growing number of retirees are back to the 9-to-5 grind. And many more are thinking of getting a job, mainly because they need the money. To unretire, though, is a big decision.
So, how do you know if you really need to come out of retirement? Often, there are financial — and emotional — red flags that tip you off. Below, are some telltale signs that your nest egg isn't filled with enough dollars to fund a secure retirement.
Unretiring is an emerging post-pandemic trend. One in six retirees say they're considering returning to work, according to a recent survey by payroll firm Paychex. And around 20% of retirees are working either full-time or part-time, according to T. Rowe Price's recent Retirement Saving & Spending Study. About half (48%) of those working in retirement cited "financial reasons," while 45% chose to work for "social and emotional benefits."
Why Unretire? Perfect Storm Creates Money Problems
More retirees are struggling financially due to pocketbook issues caused by inflation, stock market volatility, and rising health care costs, Paychex found.
No doubt, retiring from retirement is the financial equivalent of throwing a life preserver to a swimmer in distress. The extra income can be used to restock a bare emergency fund, replenish monthly cash flow, and repair IRAs and 401(k)s.
In short, going back to work can be the difference between retirees outliving their savings and making ends meet for the long haul.
"If your money in retirement doesn't match your vision" (of what you thought your retirement lifestyle would be), you likely have a problem," said Lamar Brabham, CEO and founder of Noel Taylor Agency, a financial services firm.
If there's a mismatch, you have two choices: "Either change your vision (reduce your spending) or increase your income," Brabham said. "That translates into get a job and unretire. It's not much more complicated than that."
Unretire Sign 1: Out Of Control Spending
Your spending is busting your budget. It's not uncommon for retirees to spend a lot more than they thought they would once they stop working. That could be due to inflation eating into your budget, too many dinners out, or unexpected higher borrowing costs.
"Spending more than you anticipated is probably the biggest telltale sign you need to unretire," said Judith Ward, thought leadership director and certified financial planner at mutual fund company T. Rowe Price.
Unretire Sign 2: Asking For More Money
You consistently ask your advisor for more money. "This shows you are spending more than you had planned in retirement and your money may not last as long as you thought it would," said Douglas Roller, owner and investment advisor representative at Crossroads Financial Group.
Unretire Sign 3: You Can't Afford Lifestyle
You must downsize your lifestyle. Here's a tell to look out for: you go to the grocery store and avoid buying a product you would normally buy because you can't afford it anymore.
"One red flag is the inability to cover your lifestyle and expenses, such as housing, health care costs, and other essential living expenses like groceries, travel, and entertainment," said Dan Cronin, founder of Lifestyle Wealth Management.
Unretire Sign 4: Nest Egg Cracks
Your nest egg begins to dwindle faster or sooner than planned. "If, during the early years of retirement, you see your principal depleting from your accounts because you're dipping into it for additional expenses, you may not have enough income to last you through retirement or cover anything unexpected," Roller said.
Unretire Sign 5: Financial Catastrophe Looms
You can't afford financial emergencies. "Medical expenses and long-term care are common money-draining culprits," said Cronin.
Unretire Sign 6: New Life Situation
Your life circumstances change. "Having to go back to work might not be because you did something wrong (in the accumulation savings stage)," said Ward. "It could be a product of a life event." A divorce, an unexpected huge medical bill, or unforeseen costs due to a natural disaster
Unretiring doesn't have to be a bad thing or something you can't overcome, either.
"All through life we adapt to our circumstances," said Ward. "(Unretiring) is just another example and a way to shore up your financial situation. So, there's no reason to beat yourself up over it. It might be an opportunity to find something that you really enjoy and meet new people."
Don't forget the biggest benefit if you unretire: It will extend the life span of your nest egg. And if you unretire and head back to work before you take Social Security, you can delay taking benefits.
And by doing so you will boost your monthly income from the federal government when you do start taking Social Security. When you delay taking benefits until after you reach full retirement age Uncle Sam will boost your Social Security payout by 8% per year until you reach age 70. Getting a paycheck again will also mean less need to drain your retirement accounts.
How Working In Retirement Affects Social Security
Still, Ward stresses that if you've already started taking Social Security, earning a paycheck again could impact your benefits.
There are two scenarios to consider. The first is if you stopped working before your full retirement age and claimed benefits but then go back to work. In that case, you have 12 months to apply for a withdrawal of benefits, Ward says. But in doing so, you would need to repay what you've already received. If you have reached full retirement age but are not yet 70, however, you can suspend Social Security payments and earn delayed retirement credits which will increase your monthly benefit.
The second thing to consider is that going back to work before your full retirement age while receiving Social Security benefits "can reduce the size of your benefits because of income limitations," said Ward. If you exceed the 2023 earned income limit of $19,560 per year, your benefits will be reduced by $1 for every $2 you earn above the limit.
