Retirement is one of the most significant financial decisions you can make in your life. Not only are you traditionally leaving behind a consistent income, but you’re deciding to leave a career you built for 15-25+ years.

But times are changing, and so is retirement. Gone are the days where people just wanted to sit on the beach or play golf.

Express Employment Professionals staffing agency recently did a poll and found that 75% of workers 57 to 75-years old said they would rather be semi-retired than leave the workforce completely. While the main reasoning for this is financial – nearly two-thirds expressed concern about having enough savings to quit the daily work grind – many are doing this because they want to work through retirement.

When it comes to contemplating a second act, there are a few reasons why it makes sense.  We dive into them below.

1. Keeps You Sharp and Connected to the Trends

Working in retirement is not just about the paycheck. It’s about staying connected to the world around you. And while your resume likely doesn’t need any further polishing, with technology and business evolving more rapidly than ever before, it pays to continue to stay current. Research has shown that seniors who maintain strong social networks have better overall health, including better brain function.¹

In addition to your cognitive health, it has emotional health benefits. Working allows you to stay on top of trends, which will keep you connected and relatable to those around you, of all age groups. It also gives you an opportunity to share what you know and act as a mentor for others. And in our new working-from-home world, the generations coming up can use as much contact and advice as they can get.  Additionally, staying connected to the more significant economic trends and how things are shifting may enable you to identify opportunities from both a business and investing perspective.

2. Enables You to Keep Focusing on Your Investment Portfolio

When you stop working, the way you approach your investment portfolio changes in a big way. Rather than being on the offensive, you go on the defensive, managing your risk as you draw down, investing in more conservative investments.

But when you continue working, even if it’s part-time, you can prolong your offensive posture. Because you still have income coming in the door, you may be able to dial up your portfolio allocation with growth-focused asset classes or investments. In result, you could potentially create a larger nest egg, and when you decide to fully retire, you can live more comfortably and leave a larger legacy.

3. Allows You to Delay Social Security 

The difference in the monthly benefit for waiting until you hit or exceed full retirement can be very significant. Early Retirement is 62 years old; Full Retirement is 66 or 67 depending on your birthdate, and Late Retirement is 70.

Your decision is whether to claim social security as soon as you are eligible or wait for a few more years to take advantage of the late retirement boost – which is a permanent 8% per year raise for every year you delay past your Full Retirement Age, up until age 70.

Working longer allows you to delay social security longer, increasing your benefits when you finally stop working.

Suppose you plan to work during retirement and take social security. In that case, one consideration is the tax implications of additional income. Up to 85% of your social security income may be subject to taxes, and Medicare is means-tested. If your income is over a certain level, you may be subject to the IRMAA surcharge on the Part B and Part D premium.

4. Encourages You to Find a New Direction and Your Passion

Finally, one of the best aspects of starting a second career is the concept of following your passion. Too often, you hear stories about someone who was successful in their career, but always had a dream that remained unfulfilled. They may have been great at their corporate job, but they never opened that business on their own. They may have been excellent CPA, but they also had a skill for art.

Because you can pair living off some of your nest egg with supplemental income, this frees you up to find a career that excites you every day.

So How Can You Prepare for an Encore Career?

1. Assess your current financial situation – Do you need to work? How much work would be optimal?
2. Reverse engineer your passions –What professions intersect the skill you want to use?
3. Identify your prospects – Who do you know? What companies do you know of?
4. Build your brand – When’s the last time you updated your resume?
5. Get your second career going – What is the first step? Build a business plan, start networking, talk to your spouse about what your new life will look like.

The Bottom Line

Getting a second career going is incredibly important for many reasons, but your financial, physical, and emotional health are at the top of the list. If you’re aiming to dive into a second career, consider why it may or may not be a good idea, and discuss it further with your financial advisor.

1. National Institute on Aging: Cognitive Health and Older Adults

This work is powered by Advisor I/O under the Terms of Service and may be a derivative of the original. The information contained herein is intended to be used for educational purposes only and is not exhaustive.  Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return.  If applicable, historical discussions and/or opinions are not predictive of future events.  The content is presented in good faith and has been drawn from sources believed to be reliable.  The content is not intended to be legal, tax or financial advice.  Please consult a legal, tax or financial professional for information specific to your individual situation.