When it pays to continue working in retirement

Key Points
  • More individuals age 55 and up are making money through the gig economy and looking for second acts to their careers.
  • These transitions are increasingly common as workers face the challenges of living longer and identifying ways to extend their careers on their own terms.
  • Experts advise that you carefully map out a professional path and consider the financial and social impacts of your decisions.
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When Jillian Cain retired at 62 from her job as an executive assistant, it gave her the opportunity to pursue another lifelong goal: selling photographs.

The Fort Lauderdale, Florida, resident had taken photos throughout her life but had had little success making money from her hobby.

Then Cain's husband asked one of his friends how he managed to sell his photos, and a new job was born. Several years later Cain now shoots and sells her photos through stock photography website Shutterstock.

The side gig has provided Cain with the opportunity to use her art education from the Columbus College of Art & Design in Columbus, Ohio.

It also has enabled her to pad her budget with as much as $135 per month, money Cain uses toward traveling or new camera equipment.

"My whole life I've been trying to sell photos, and it finally happened," Cain said. "Fulfilling a dream and getting paid — what could be better than that?"

A 2017 Prudential Financial survey found that 31 percent of individuals who work exclusively in the gig economy are baby boomers, or those age 56 and up. Of those workers, 34 percent said they are retired. 

That reflects a growing trend, according to financial advisor Ric Edelman, founder and executive chairman of Edelman Financial Services and author of the book The Truth About Your Future.

As technology makes it easy, low cost and low risk to find gig jobs, many retirees are looking to these opportunities, Edelman said. "For seniors who are trying to supplement their income with an extra $5,000 or $10,000 a year, it's a wonderful way to make extra money,"  he points out.

More than 10,000 websites and smartphone apps offer new ways to make money, according to Edelman. Those sites and apps enable you to rent out a room in your home through Airbnb, drive passengers in your car through Uber, walk a dog or pet-sit through Rover or sell your clothing through Tradesy.

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"Virtually anything you can imagine creates opportunity to monetize," Edelman said. "It's almost limitless."

Finding new ways to make money will become even more imperative as retirees face longer life expectancies, with more individuals becoming centenarians, according to Edelman. Individuals will also stay healthier for longer as medical developments eradicate some of the leading causes of death, he said. 

"Many scientists are anticipating that by the time you're 95, you'll be healthier than when you're 55," Edelman said.

Those forces will change the traditional career trajectory, Edelman said. Instead of working in one career for 45 years and retiring for 25 years, individuals will have multiple careers and return to school multiple times over the course of their lives.

Pursuing your dream job in retirement

Joe Casey, an executive coach and retirement coach at Retirement Wisdom in Princeton, New Jersey, said he is already starting to see that trend take hold.

Casey worked as a human resources executive at Merrill Lynch for 26 years and started his coaching business as his own second act following the firm's acquisition by Bank of America.

It just makes a tremendous difference in the overall retirement-income plan if people continue to work in retirement.
Kristi Sullivan
CFP and owner of Sullivan Financial Planning

Today he helps professionals identify their own second careers. That includes one executive who was being groomed to be the successor to a 74-year-old CEO.

"He said, 'I don't want to be CEO. I don't want to be here when I'm 77. I want to do something different, but I don't know how to figure that out,'" Casey recalled of their first meeting.

Now two years later, the executive, 55, retired in December and has launched his own second career focused on philanthropy.

Most of Casey's clients are putting their professional expertise to work through consulting, freelance or entrepreneurship ventures.

"They have the financial resources. They know they are going to retire," Casey said. "And they have the desire to do something else, often something more meaningful or the best parts of their job. They're tired of the rest of it; they just want to keep the good parts."

The most successful transitions are those that workers have started planning well in advance so that they are not blindsided by sudden changes, according to Casey.

That comes as 48 percent of retirees leave the work force earlier than they planned, according to the Employee Benefits Research Institute. Of those workers, 26 percent pointed to changes at the companies where they worked, including downsizings, for prompting that shift.

Seniors & the gig economy

Where to start

Taking an assessment can help you take stock in an inexpensive and time efficient way, according to Casey.

"It always surprises people," Casey said of the results. "It focuses their attention on where they need to work."

Once you've established the direction in which you would like your new career to go, focus on building your business network through your existing contacts and new connections related to that opportunity. Ideally, this should be done well in advance of your transition.

"It's a good time, especially if they're three years out, to begin to plan those seeds," Casey said.

Finally, consult with others who are already doing what you plan to do. Get their recommendations for what you should and shouldn't do, Casey said.

Financial considerations

Continuing to work into your retirement years can have a dramatic impact on your finances.

"It just makes a tremendous difference in the overall retirement income plan if people continue to work in retirement," said Kristi Sullivan, a certified financial planner and owner of Sullivan Financial Planning in Denver, Colorado.

That goes for any income level, whether you're making $30,000 and find a job in retirement that brings in $500 a month, or you're making $300,000 and find a way to earn $50,000 a year, Sullivan said.

Be sure to make smart financial decisions when it comes to managing that extra income.

That additional money could move you into a higher tax bracket. That income could also affect your Social Security benefits. If you claim Social Security before your full retirement age, you can earn up to $17,040 in 2018 before your benefits are reduced. In the year you reach full retirement age, that limit jumps to $45,360 for the months prior to your birthday.

Make sure you accurately report your income on your taxes and pay quarterly estimates if needed.

Also be sure to invest the extra money wisely.

Financial advisor George F. Reilly, principal at Safe Harbor Financial Advisors in Occoquan, Virginia, said that a married couple he advises became tour guides in the Washington, D.C., area after retiring from their careers as Federal employees. While that extra income was an afterthought to them, Reilly steered them to put those funds in a post-tax Roth IRA.

When to call it quits

Financial advisor Robert DeHollander, managing principal at DeHollander & Janse Financial Group in Greer, South Carolina, said he meets retirees who have been "on the treadmill so long they don't know how to step off."

"It's an amazing psychological trap that successful professionals find themselves in," DeHollander said. "We try to make clients self-aware of that. Why do you really want to do this?"

Ask yourself how much those years from ages 60 to 65 will be worth to you when you're 80 years old, he suggested.

"You can always make more money, but you can't make more time," DeHollander said.