Work in Retirement: Myths and Motivations

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Retirement used to mean the end of work. But now we’re at a tipping point: a majority of people will be continuing to work after they retire — often in new and different ways. This phenomenon is driven by four forces: (1) Increasing life expectancy, which has produced a retirement that can last 20 years or more, (2) Elimination of pensions for most workers, shifting the burden for funding retirement from employers to retirees, (3) Recent economic uncertainty, which has been a wake-up call for many people that it is not financially sustainable to retire without some employment income, and (4) Re-visioning of later life, as new generations seek greater purpose, stimulation, social engagement, and fulfillment in retirement.

To better understand the role of work in today’s retirement, in 2014 Merrill Lynch and Age Wave completed a national study, Work in Retirement: Myths and Motivations. This study, based on a nationally representative survey of more than 7,000 respondents, examines the experiences of working and non-working retirees, and dispels four important misperceptions, including:

Myth 1: Retirement means the end of work.

Reality: Over seven in 10 pre-retirees say they want to work in retirement. In the near future, it will be increasingly unusual for retirees not to work.

• Nearly half (47%) of today’s retirees say they either have worked or plan to work during their retirement.
• Today, 40% of people age 55+ are working, up from 32% in 2000. We have not had such a high percentage of people age 55+ working since the 1960s.
• In the last seven years, workers age 55+ accounted for all workforce growth. Between 2007 and 2014, the number of workers age 55+ increased 6.8 million. Meanwhile, the number of workers under age 55 fell by 7.2 million.
• Younger generations are more likely to say they will need to rely on themselves—and a longer work life—to fund retirement.

Myth 2: Retirement is a time of decline.

Reality: A new generation of working retirees is pioneering a more engaged and active retirement—the New Retirement Workscape—which is comprised of four different phases: (1) Pre-Retirement, (2) Career Intermission, (3) Reengagement and (4) Leisure.

• Phase 1: Pre-Retirement. In the two years prior to retirement, 54% of pre-retirees who want to work in retirement will have taken significant steps to prepare for their retirement careers.
• Phase 2: Career Intermission. About half (52%) of working retirees say they took a break from working when they first retired. The average Career Intermission is roughly 2 ½ years.
• Phase 3: Reengagement. After a Career Intermission, retirees who work do so on average for nine years—but with a new work/leisure balance in what we refer to as “FlexCareers.”
  • Compared to those in pre-retirement careers, those working in retirement are nearly five times more likely to work part-time (83% vs. 17%) and three times more likely to be self-employed (32% vs. 11%).
  • Overwhelmingly, working retirees say their work is far more flexible, fun and fulfilling—and less boring and stressful—than their pre-retirement careers.
  • Compared to retirees who stop work completely, retirees who continue to work in some form are more stimulated (55% vs 38%), connected to others (62% vs 45%), and proud of their lives (67% vs 57%).
  • Regardless of work status, retirees agree that working in retirement helps people stay more youthful (83%), and that when people don’t work in retirement, their physical and mental abilities decline faster (66%).
• Phase 4: Leisure. After the Reengagement phase, retirees stop working permanently to rest, relax, and focus on other priorities. Working retirees expect health challenges (77%) or simply not enjoying work as much (61%) to be the most likely causes of their stopping work permanently.

Myth 3: People primarily work in retirement because they need the money.

Reality: This research reveals four types of working retirees: Driven Achievers (15%), Caring Contributors (33%), Life Balancers (24%) and Earnest Earners (28%). While some work primarily for the money, many others are motivated by important nonfinancial reasons.

• Retirees are four times more likely to say they are continuing to work in retirement because they “want to” (80%) rather than because they “have to” (20%).
• Among pre-retirees, “the money” and “staying mentally active” were tied as the top two reasons they will work in retirement. But when working retirees were asked what they feel is the most important reason to work, they were twice as likely to say “staying mentally active” (62%) as “the money” (31%).
• The study revealed four distinct types of working retirees:
  • Driven Achievers. Four out of five (79%) feel at the top of their game, 39% own a business or are self-employed, they are the most satisfied with work, and they tend to be workaholics, even in retirement
  • Caring Contributors. Seek to give back to their communities or worthwhile causes. Four out of ten work for a nonprofit, and more than a quarter are unpaid volunteers
  • Life Balancers. Primarily want to keep working for the workplace friendships and social connections—and for the extra money. They seek work that is fun and not stressful, and often work part-time
  • Earnest Earners. Need the income from working in retirement to pay the bills. Fewer are satisfied or motivated at work.

Myth 4: New career ambitions are for young people.

Reality: Nearly three out of five retirees launch into a new line of work, and working retirees are three times more likely than pre-retirees to be entrepreneurs.

• Nearly three out of five (58%) working retirees said retirement was an opportunity to transition to a different line of work.
• The top reasons retirees moved to a new line of work were not financial, but for a more fulfilling career: to have more flexibility, more fun, and less stress. These reasons were greater than three times more important than “to make more money.”
• Working retirees are three times more likely than pre-retirees to own their own business or be self-employed (32% vs. 11%).
• The top reason “retire-preneurs” started their own business was to work on their own terms (82%). Just 14% felt they had to start their own companies because they otherwise couldn’t find work.

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