American Retirees Facing Tough Decisions.
Retirement in America is undergoing a dramatic shift. For many seniors, it’s no longer a time to relax and enjoy the golden years. Instead, a growing number of retirees are finding themselves re-entering the workforce, driven by economic pressures and a desire for personal fulfillment.
A recent survey conducted by Indeed Flex among U.S. seniors aged 62-85 reveals that nearly a third of retirees are considering taking on one to three shifts of temporary work each week. Additionally, 42% of working seniors who have never retired are contemplating adding temporary work to their full-time jobs.
So, why are so many seniors eager to return to the workforce? Several factors are contributing to this trend of “un-retirement.” According to Indeed Flex, personal fulfillment, the desire for social interaction, and healthcare benefits are key motivators. However, the most significant driver is the skyrocketing cost of living.
Inflation has become a major financial issue for retirees. A fifth of the seniors polled by the temporary staffing platform have already returned to work due to rising living costs. Novo Constare, CEO and co-founder of Indeed Flex, noted, “Temporary employment can serve as a sustainable and long-term source of extra income.”
The surge in the cost of living has been relentless in recent years. The average rate of inflation was 4.1% in 2023, 8% in 2022, and 4.7% in 2021. While Social Security cost-of-living adjustments (COLAs) are designed to protect seniors from these increases and maintain their purchasing power, they often fall short in shielding the value of retirees’ savings and investment accounts outside of Social Security.
Data from the Senior Citizens League highlights the inadequacy of COLAs in maintaining the spending power of Social Security benefits. The study indicates that Social Security benefits have lost an estimated 36% of their buying power since 2000. The authors argue that this is due to the Consumer Price Index used to adjust Social Security benefits, which is based on urban wage earners and clerical workers, not retirees. Between January 2000 and February 2023, Social Security COLAs increased benefits by 78%, but the cost of goods and services purchased by typical retirees rose by 141.4%.
As the real value of their Social Security benefits and retirement savings decline, American Retirees have little choice but to seek additional income sources. Many retirees had insufficient savings to begin with. Vanguard’s data from 2022 shows that the median balance in defined contribution plans among those aged 65 and over was just $70,620.
Given these financial challenges, returning to work in some form is often the best and only option for many retirees. If savings are low and Social Security benefits are insufficient, earning a paycheck is preferable to depleting investment accounts and risking financial instability later in retirement when working may become more difficult.
There are various side hustles suitable for seniors, such as tutoring, consulting, pet sitting, and food delivery. With the rise of apps, finding flexible work that fits one’s schedule is easier than ever. Additionally, reaching out to former employers and coworkers might reveal part-time opportunities in familiar fields. Many companies now offer flexible or remote work options, allowing seniors to work from the comfort of their homes.
For those unable or unwilling to re-enter the workforce, other strategies include relocating to a more affordable area, adopting a more aggressive investment mix (though this carries additional risk), or downsizing and tapping into home equity to reduce housing costs and bolster savings. These options, however, may come with their own set of challenges.
The key takeaway is the importance of proactive financial management. Seniors must act swiftly if their accounts are at risk of depletion. Living beyond one’s means can quickly lead to financial instability, making it increasingly difficult to maintain stable finances throughout retirement.
In summary, the landscape of retirement in America is changing. Economic pressures, particularly rising inflation, are compelling many seniors to return to work. While this trend presents challenges, it also offers opportunities for retirees to find personal fulfillment and maintain their financial stability. As the cost of living continues to rise, it’s crucial for seniors to explore all available options to ensure a secure and comfortable retirement.
