The Post-Retirement Career: Recent Research Suggests We're Not Really Retiring (Even if We Think We Are)

By James O'Brien.

Recent research shows that 47% of retirees say they end up working  or they plan to work after retirement. And that's not just a post-recession necessity: some 72% of retirees polled in an Age Wave/Merrill Lynch report said they want to keep working after retirement.

"Were at a tipping point," according to the study, titled Work in Retirement: Myths and Motivations. "A majority of people will be continuing to work after they retire often in new and different ways."

And so, is the concept of retirement waning entirely? Also, what roles will investments and savings play in this process, if these changes do occur?

Let's take a closer look. We'll identify not only a number of driving factors but also the potential for this new workscape to change the way we understand retirees and the financial/personal approaches they're taking to what have traditionally been post-employment years.

A New Retirement Model

First, let's turn to how post-retirement, second-phasecareers manifest. Consider the following four-phase retirement model for the working retiree .

• Pre-Retirement: Five years prior to retiring, 37% of those who intend to work afterwards begin to prepare for continued employment. Two years before retiring, 54% of these individuals significantly increase those preparations.
• Intermission: There is then often a break. Some 54% of retirees who intend to work first enjoy time away from employment, typically about 2-1/2 years.
• Reengagement: For up to a decade after intermission, retirees who return to work then engage in new careers. Some 83% of them do this part-time,close to 1/3 opt for self-employment.
• Full Retirement: In the final shift, retirees then disconnect from work and enact what we usually think of as a traditional retirement lifestyle: they focus on leisure and non-work priorities.

What's motivating this shift toward preparation, break, resumption, and then leisure? More than one factor, it turns out. Retirement is deeply connected to the financial realities of the 2000s and 2010s (and what will come next, too), but it is also evident that ambition, obligation, and social impulses are in play.

Roots of the New (Non-)Retiree

In some categories, only 4% of the polled retirees said they felt financially prepared for post-work years. And in the best-case categories, only about half said they felt that way.Of course, these are generations and individuals acutely affected by the 2007 - 2009 recession.

• A study published by the National Poverty Center tells us that between 2007 and 2013, older workers saw essentially no returns on their equity investments  a sector in which prices fell 50% during the peak of the downturn.
• The value of 401(k)s and IRAs plummeted, overall, by $2.8 trillion .
• Declining interest rates sliced into the potential retirement income of investors as well: the average total wealth of Early Baby Boomer households decreased by 2.8% from 20062010. Compared with what the NPC suggests could have been the case  a 5.4% increase in household wealth in a non-recessionary environment  the difference in these soon-to-retire investors' futures amounted to some 8.2 percentage points never realized.

The point is, when a report tells us that 72% of retirees or near retirees want to keep working after they step away from their present careers, to a significant extent the reasons for that desire are financial. For those who saw their retirement instruments take a hit, 2007 - 2009, that's one possibility. But there are other factors in play as well.

'Retire-preneurship' and Retiree Motivations

In some cases, key to the shift in stated retirement intentions is what we can characterize as the psychology of aging workers.

That is, post-retirement employment can dovetail with personal motivations; it's not always about the cash needed to fund post-work years.

• 4-out-of-5 retirees still perceive themselves as being at the top of their game in terms of professional acumen. These individuals seek a kind of retire-preneurship.
• 33% find work after retirement that allows them to give back to a community or contribute to a cause-oriented project.
• 24% seek the continued interpersonal contact that comes with a workplace.

But then, money again rears its head.

When it comes to funding retirement income, 28% said they'd need the wages from post-retirement jobs to pay their ongoing bills.

Sea Change: Thinking About the Future

What we can say for certain is that the traditional concept of save-invest-retire-withdraw is undergoing a transformation. Retirees either need, or want, to return to work after a break in their career paths.

When they do, some 58% of them embark on an effort different from what they did at their previous jobs. And by the time Millennials retire, it's probable that some 26% of their income will originate from this kind of employment  as opposed to the 5% post-retirement work represents to the Silent Generation and the 17% it accounts for among Baby Boomers.

That might not be enough to significantly alter the way we approach asset portfolios, but for future generations who keep working after 65 - 67 years of age, it will almost certainly have an impact on early-stage income needs and withdrawals  not to mention an impact on what we often think of as an acute period of intense investment, the decades of an individual's 40s and 50s.

Bottom line, paradigms stand to shift if more workers are preparing for a second career rather than outright dependency on savings and returns.

And if the second career comes with benefits? Then post-retirement workers stand to augment healthcare costs to boot. This could mean changes in the assisted-living and elderly-housing sectors, with working retirees commanding greater resources in terms of paying for their homes and medical expenses.

The numbers suggest a sea change is underway. We're often no longer really retiring, in the long-established sense of it, even if we still think we are. And we may well find retirees moving further along this path, redefining post-career work and its consequences in the decade to come.