Revealed: the benefits of unretirement

A generation ago, when you finally reached your retirement date, you’d have received a handshake from the boss, a parting gift, and left the office for the final time on a Friday afternoon. You’d then have woken up on a Monday morning with the rest of your life in front of you.

These days, retiring has become a much more flexible and gradual process. Studies have also found that one in four people decide on ‘unretirement’ a few years into stopping work – and there could be many benefits to doing this.

Why ‘retiring’ has changed over the years

As financial planners, you might expect us to be encouraging you to retire. We spend many years enabling our clients to retire on their terms, and their retirement is the culmination of years of planning and saving.

The days of going from full-time work to full-time retirement are largely over. However, most clients do still have an idea of when they would like to stop work – and many are even counting the days until that moment!

But, for others, financial planning is about enabling them to choose what they would like to do with their life – and that might mean continuing to work.

Whether you’re planning to start your own business monetising a hobby or skill, working part-time for your current employer, or embarking on a consultancy or freelance role, there can be many benefits to continuing to work in your later life.

3 ways working longer can benefit you

  1. Build up a bigger retirement pot

The obvious reason to keep on working is that it gives you more time to build up savings for when you eventually retire. Your contribution, combined with tax relief and payments from your employer, mean you’ll have a bigger pension fund when you decide to stop work. And, of course, you’ll enjoy a longer period of investment returns.

  1. Spend less time drawing on the pot you have built up

If you choose to retire later then it’s also likely that you will spend less time drawing on the pension pot you have saved. If you choose to buy an annuity then you might benefit from a better annuity rate, or you may be able to take a higher sustainable rate of drawdown from your savings.

  1. Defer your State Pension

If you decide to keep working past State Pension age you can elect not to take your State Pension immediately. If you defer your State Pension for one year you will enjoy an extra 5.8% on your pension for the rest of your life.

Why working longer might be good for you

As we have seen above, there are several financial reasons why you might want to keep working for longer. But, there could also be health reasons why working is good for you.

Shigeaki Hinohara is credited with building the foundations of Japanese medicine and helping make Japan the world leader in longevity. One of his basic guidelines for living a long, healthy life was ‘don’t retire. And if you must, retire much later than age 65’.

Hinohara practised what he preached. Until a few months before his death, the doctor continued to treat patients, kept an appointment book with space for five more years, and worked up to 18 hours a day. He was 105 years old.

Hinohara points out that the current retirement age was set at 65 half a century ago when the average life-expectancy in Japan was 68 years. Today, Japanese women live to be around 86 and men 80, and there are 36,000 centenarians in the country.

Rather than enjoying three years of retirement, modern retirees might enjoy three decades. So, if you can, Hinohara says you should keep working and if you must retire, do it later.

The ‘unretiring’ revolution

If you’re still at work, you may be thinking about your future plans and how flexibly you want to retire. But it’s not just employed people who are reviewing their plans, as there is growing evidence of ‘unretirement’.

This is the phenomenon where people leave regular work but go back into the jobs market some months or years later. This might be a positive choice as they miss the social elements or mental stimulation of work or find themselves bored by being around the home.

For others, it can be for financial reasons as they find themselves struggling on a reduced income once their wage has ceased.

Loretta Platts of the Stress Research Institute at Stockholm University says: “Some people have a retirement shock. This isn’t what they thought [it would be].”

In the UK, the proportion of 50 to 64-year-olds in work has climbed from around 60% in 2000 to around 71% today. The number of people working beyond 65 has doubled to about 10%.

Research by the University of Manchester, published in 2017, also found that around one in four workers ‘unretires’, often within five years of retirement. Men are 26% more likely to unretire than women, and if you’re in good health you are far more likely to go back to work.

Get in touch

It’s clear that 21st-century retirement is likely to be different than that experienced by your parents and grandparents. Whatever your goals, having the right plan in place can help you to enjoy the retirement you want.

Whether you plan to spend your years on the golf course, or you want to continue to work, we can help you to make that happen. To find out how, please get in touch. Email or call us on 01189 876655.