Reasons Why Some Retirees Are Returning to the Workforce
Several recent studies show a growing trend of retirees returning to the workforce. According to Pew Research, individuals age 75 and older are the fastest growing age group in the workforce. In fact, this worker demographic has more than quadrupled in size since 1964.1
A survey conducted by Resume Builder found similar results, with one in eight retirees between the ages of 65 and 85 reporting that they’re likely to return to the workforce in 2025. This is in addition to the 22% of seniors who are already working. Of that 22% who are already working seniors, 38% of their ranks don’t plan to retire for more than five years, and four out of 10 seniors who are currently working were once retired.2
So, what’s driving this unretirement trend? There are likely several main factors, including:
- Money – 70% of seniors who plan to return to the workforce reported that money is the primary factor driving their decision. Many are discovering that recent increases in the cost of living are rapidly depleting their retirement savings.3 Other common money concerns are related to rising housing costs, which 39% of seniors worry about, and paying off non-medical debt, which 34% of seniors worry about.4
- Longer life expectancies – Today’s seniors tend to be healthier and have longer life expectancies than those in past generations, making it possible for older people to remain active and engaged well into their golden years.
- The evolution of retirement plans – In the last few decades, employers have moved away from offering pension-style retirement plans in favor of defined contribution plans like 401k and 403b programs. This means workers carry more responsibility to save for retirement throughout their working years, and those who haven’t saved enough may need to keep working or return to work once they’ve retired. It also means workers are no longer incentivized to retire at a certain age.
- Boredom – 42% of seniors are returning to the workforce simply because they find themselves becoming bored in retirement.5 In addition to a retirement income boost, working can help slow cognitive decline through mental stimulation, provide an opportunity for social interaction and offer fulfillment and structure to a retiree’s life.
Although the benefits of returning to work may sound appealing, there are several potential drawbacks to consider, including:
- A potential decrease in Social Security benefits – Before accepting a new position, it’s important to fully understand how working can impact your Social Security benefits. If you haven’t yet reached full retirement age (FRA) and are drawing Social Security, some of your benefits may be withheld if you earn more than a certain amount. In 2025, you can earn up to $1,950 per month without impacting your benefits. For earnings exceeding that threshold, your Social Security benefits will be reduced by $1 for every $2 in excess earned income. Once you’ve reached FRA, this earnings test no longer applies.
- Tax implications – If you return to work after you’ve already started your annual required minimum distributions (RMDs) from your existing retirement accounts, you must still take those RMDs every year. This can mean a big chunk of taxable income on your tax return once new wages are added on top, increasing your federal and state income tax liabilities. Any additional employment income is also subject to Social Security’s FICA taxes.
- Medicare surcharges – If you’re enrolled in Medicare, higher income could result in an income-related monthly adjustment amount (IRMAA) surcharge on your Medicare premiums.
