Money Matters: Retirees Returning to the Workforce

Millions of Americans quit their jobs and retired during the pandemic. But now with economic uncertainty and a falling stock market, every 64% of those aged 55 to 64 who retired have re-entered the job force as they found they could not live the life they wanted. More are expected to follow. Inflation has also forced many to give up on retirement. Others are postponing their retirements. 

I had a chance to interview Leslie Boyden, co-author of the new critically acclaimed book, Retirement Conquered, to learn more.

Why are so many retirees returning to the workforce?  

Many retirees are returning to work because of many factors. Most people didn't plan for the additional unforeseen costs to retire, such as safety and security their retirement, many keep their retirement in market based products and when the market goes down, so does their asset that is being used to supply their livelihood, and therefore shortening the amount of years they have to spend in retirement. Inflation - Is a cancer to your retirement, when we have increased inflation, it eats away at our power to purchase and therefore is costing a retiree more to stay retired.  Growth of their retirement money is one of the most paramount factors. When you aren't working anymore, you aren't contributing to your retirement plan anymore and therefore aren't able to offset losses with additional money and earn rates of return on the New monies being put into their account. Also, today people are putting less than 20% of their income into retirement and choose to spend more on other things deemed more important, when in fact in order to retire today you need to be saving 30% or more of your income into 4 or more retirement vehicles to make sure you have multiple streams of income. You can't depend just on social security and your single retirement account as the only sources of income to stay retired and live a lifestyle that you had when you were working. Taxes is the next thing that retirees don't account for. When working you can have more tax right offs and therefore in many cases are getting tax refunds. But in retirement, those right offs aren't there anymore and many retirees find themselves having to pay taxes. Healthcare is another area that many retirees don't think about. Everyone has to pay for medicare supplements and they aren't cheap. But we don't consider this cost when we are calculating how much more we need for healthcare. The cost of prescription medications, and potential surgeries where you may have to pay for co-insurance can be devastating to our retirement accounts. All of these are concerns that most people just don't factor into retirement and therefore find themselves running out of money and having to go back to work.

 

Is this predominantly people who took early retirement during the pandemic, or is it older retirees as well?  

It is a combination of both, many who were laid off, or were downsized out of the workforce, decided to try retirement. You can't try retire, you have to plan it out, and the inflation during the pandemic isn't what it is today, and we are telling people who are considering retiring to calculate 20% additionally for things such as inflation, taxes, healthcare and other unforeseen expenses, such as home repairs, car repairs, etc. Also, during the pandemic they didn't have to contribute to their retirement plans, it was suspended and this can have a devastating affect. Many also, took money from their retirement accounts because they didn't have to pay the 10% penalty. When you take money from your retirement, you are robbing yourself from being able to grow your retirement nest egg. Also, I have known some older retirees just get bored staying home and want something to do, so they go back to work. I have suggested many times that when you retire maybe start a small business so you can keep yourself busy part-time and get tax right offs for having a business.

Why are they suddenly finding they do not have as much a they thought they had to live off of in retirement? 

Because when they calculated their retirement plan, most are trying to live the lifestyle that they had when they were working. In reality, most planners are calculating 4% of their retirement account per year as a living wage. But with today's increased expenses it needs to be calculated at 6-8% and that means their account will run out of money sooner. If someone made $80K per year and was living a lifestyle for that income and want to continue to live that kind of lifestyle, then they need $2 million available funds to live 25 years. And this doesn't count for the decrease of our purchasing power from inflation or emergency expenses.  

Should people consider delaying their retirement? 

Depends, they need to speak with someone that can look at their total financial picture and be honest with them on where they are and how long will their retirement last.  Also, people need to start earlier in designing their retirement to include additional retirement vehicles to place their money into, to help them have a better return on their investment, with lower risks and guaranteed income for life strategies.

How can people make sure they're still on track to retire (and stay retired) at the age they want? 

They need to work with an advisor that can show them how to make their retirement assets grow by compounding interest and strategically set it up so they can have more money for longer periods of time.

What are challenges people face when planning for retirement? 

As we said before, they need to consider that they aren't adding money to their retirement anymore, unless they set up a plan to grow part of their retirement into vehicles that can pay them 7 or 8% interests up to as much as 20% growth. People aren't calculating for increases in taxes, or healthcare.  They aren't calculating for home repairs, car repairs and having a sizeable emergency fund and they find themselves challenged by trying to live day by day with increasing expenses.

What do they often overlook? 

Taxes, and the fact that they were putting money into tax deferred accounts and getting tax benefits when working, now they are taking the money out and they have to pay taxes on that money in those accounts. They overlook that healthcare costs generally go up and it can cost them thousands of dollars per year to pay for healthcare. They are also overlooking how can they use their retirement accounts to grow their accounts and still provide them a solid income stream. Their money needs to be working for them, by growing it at potential double-digit returns.

Tell us about Retirement Conquered? 

This book was written to shed light onto their retirement and provide them vision and a clearer picture for their retirement. We focus on a proprietary process called the S.I.G.H.T. Code, which is helping our clients to focus on the five areas of retirement, and make sure that they can have the necessary money to live a stress-free and confident retirement. We bring our own life experiences into the picture to have people understand that we have been down the path of growing money for our retirement and losing money for our retirement, and why it is important to have a 4-legged retirement stool to sit on with multiple streams of income. Most people are depending on just two or three streams of retirement income and in today's world, and most of the time it is not enough.