Tuesday, 31 March 2009

Working after Retirement - It Can Be a Happy Reality

Working after retirement is the new reality. In Canada, the USA and the UK, it is the same. The reality arises from necessity for most people, a result of rising longevity, inadequate private and public pensions and insufficient saving. The on-going credit crunch market downturn, from which recovery is likely to take many years, has plunged a dagger into the hopes of many for a comfortable non-working retirement. A falling housing market puts another big dent into a supposedly safe store of personal wealth.

That's the negative view of life. Rather than bemoan our fate - and I say "our" because I am in that very boat, having only my investment portfolio and the meager CPP/OAS/GIS to live off in future - I think it is worthwhile to try making lemonade from those lemons life is handing us and look on the positive aspects of working after retirement.

And I don't think that is just pretending that the financial equivalent of cholera is a good thing. It isn't an accident that many people voluntarily continue working after their retirement, even when their rock solid (government) defined benefit pension is more than capable of supporting their lifestyle. A number of my friends are doing exactly that - working despite their financial security being assured.

Benefits of working after retirement:
  • Sense of worth and accomplishment - isn't one of the most important sources of happiness a feeling that one is doing something worthwhile on this planet instead of just occupying space?
  • Connection with people and social interaction - part of the rewards of work is talking with others and doing things with them; being isolated and lonely can be deadly in a very literal sense, particularly as one gets older
  • Responsibility and obligation - the sense that others are relying on you and that you have to deliver something, is a valuable pressure; no deadlines, no responsibilities tends to turn people into mental and physical slobs
  • Financial diversification - maintaining a work capability is the equivalent of having a revenue generating asset/investment that is likely fairly (you may still lose your post-retirement job if the economy goes too badly) uncorrelated to stocks or bonds
  • Double effect on retirement finances - every dollar one earns can be spent on living expenses while at the same time avoiding the withdrawal from an investment portfolio; this is especially valuable in times of market downturn when portfolio withdrawals can dramatically lower how long a portfolio lasts (see this simple example from Wachovia)
  • Equivalent to a large investment asset - if your part time job earns $20,000 a year, that is the equivalent of owning a bond yielding 5% that is worth $400,000.
  • Health insurance, possibly - some employers offer health insurance for part-timers
  • Double-dipping with the CPP and OAS - once you start receiving CPP, you can then begin to work again without losing the benefit (make sure you conform to CPP rules explained here); with OAS, paid after age 65, you can continue to work and receive it, though benefits are progressively taxed back when income goes over about $64k (see TaxTips.ca Seniors page)
  • More, better sex! - if all the above is true, this will inevitably follow, right?

Authors like Sherry Cooper in the New Retirement (my review here) and Warren Mackenzie and Ken Hawkins in New Rules of Retirement (my review here) tell us how to prepare financially and mentally for the reality of retirement. There is also a book called Working after Retirement for Dummies but I don't think it is a dumb thing to do at all.


Anonymous said...

Way to go! This is a refreshing article after all the doom and gloom, and uncertainty lately.

Always enjoy your articles.

Horlic said...

Yeah, absolutely agree with your point.

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