Who says you need to stop working at age 65?
One of the biggest misconceptions about retirement is the concept that retirement means not working. In fact, with all the pressures on Canadians to self fund retirement, one of the easiest solutions might be to incorporate work into our retirement.
Current trends are showing that work is becoming an increasing component of retirement.
- 85% of Americans, who will retire this year, expect to work in retirement (AARP).
- In Canada, 73% expect some of their retirement income will come from work (Pollara).
- 23% of Canadians are working past the age of 65 (CRA).
- In 1998, 41% of seniors were working at least part time (Statistics Canada).
- 40% of retirees retiring between the age of 55 and 60 went back to work (Statistics Canada)
Reasons for these retirement trends
One of the contributors to working in retirement is there are fewer people with pension plans. One of the traditional views of retirement is working for the same company for 35 years and then getting 70% of your income replaced by a company pension plan. These types of plans are becoming real dinosaurs and even fewer people are working for the same company for 35 years.
In addition, life expectancy is increasing and this will continue to put pressure on Canadians to make their retirement assets last longer. Working in retirement takes some of the pressure off of your retirement savings.
With the aging population, there may be a shortage of workers behind the baby boomers. As the baby boomers start to retire, companies will have to create more incentives to keep older employees. We have already started to see increased trends towards phased retirement and bringing employees back on contracts to fulfill projects. Older Canadians will have greater control over their ability to work in retirement.
Finally, I think the entire vision of retirement is starting to change. People are looking into the future with a different view that retirement may not be about an end to work but rather a transition in their life. The old model of retirement was to retire at age 65 and live for about 10 years into retirement. It was a time to relax and do very little, sometimes because of health issues. In the new model of retirement we have to make provisions for the fact we are healthier and more active; we have a lot more variety and choice; we are likely to have a much longer retirement period (20 to 30 years); we must find things to do with our time to prevent boredom and one of those might be work.
There is nothing wrong with the old model of retirement. Retirement is a good time to relax and recharge after your working years. However, there is also nothing wrong with incorporating work into your retirement plans. Studies have shown that one of the contributors to a happy retirement is that you find fun and enjoyable things to do with your time. Those that do not find ways to spend their time, often become bored, lethargic and depressed.
If you are one of the 73% of Canadians that may do some work in retirement, it is essential to start planning ahead. Instead of seeing your financial planner to see if you have enough money for retirement, you may want to sit down with a career transition expert to help you incorporate work into your retirement. Start volunteering to see what things you like to do and what organizations you feel comfortable with. Build your list of contacts to see who might need some part time work. Plan on upgrading your skills and knowledge ahead of time.
Planning ahead may involve thinking about all the things you enjoy about work. It might be the friends you have made and the social contacts. It could be the sense of accomplishment and overcoming challenges or finding solutions to problems. Or, it could simply be the money.
Retirement may be the opportunity to do what you really love to do and get paid for it. It may be a time when you can make a little less (because you will have other sources of retirement income) but do what you love to do. It may be an opportunity to start a business fuelled by a passion than a paycheck. It may be a time to take your hobbies and turn them into income. It may be an opportunity to take on fewer contracts or projects that you enjoy and want to do. Working in retirement may not be such a bad thing if you are working because you want to as opposed to working because you have to.