There’s a good chance you’re looking forward to your retirement. It’s the perfect opportunity to achieve the things you previously didn’t have time for, be it a dream trip around the world, or simply spending more time with your loved ones.
That said, the rising cost of living in recent years could mean that you need to save more for retirement to support your dream lifestyle.
Alternatively, you could try “unretirement” by returning to the workforce after you initially retire.
If this sounds appealing to you, then you’re not alone – the Guardian reveals that a record number of over-50s are working part-time in the UK. Indeed, 3.6 million older people are currently working part-time, a 12% increase since 2021, up by 26% over the past decade.
While you may think retirement is the next phase of your life that you should dedicate to doing the things you previously couldn’t, unretirement could have significant benefits. Continue reading to discover how returning to the workforce could improve your financial and mental wellbeing.
“Unretirement” is simply when you return to the workforce after initially retiring
As mentioned, living costs in the UK have been rising over the past few years. The Office for National Statistics (ONS) recorded inflation to have risen by 4.6% in the 12 months to October 2023.
While this is lower than its post-Covid peak of 11.1% in October 2022, the rate of inflation remains relatively high.
As a result, many people who initially retired have returned to the workforce in an attempt to deal with rising costs. In fact, data reported by the Institute for Fiscal Studies found that, from October to December 2022, “there was a sharp and statistically significant uptick in 50- to 64-year-olds moving out of inactivity and back into the workforce”.
Moreover, while it seems like more have been returning to work in recent years, this isn’t a new trend. A 2017 study from the University of Manchester found that 1 in 4 retirees return to work, often within five years of retiring.
It’s important to note that unretirement doesn’t just mean that you start working part-time. You could also start working in a consultancy capacity, or found your own dream business that you didn’t have time for during your career.
Unretirement can have several benefits, not just for your financial situation, but also your mental wellbeing. Read on to learn more about these advantages.
Unretirement can boost your financial situation in several ways
Perhaps the main benefit of unretirement is the additional income that returning to work will likely bring. This could help alleviate any financial strain caused by the aforementioned rising cost of living, and help support your dream lifestyle during retirement.
What’s more, life expectancies are rising in the UK. The ONS reveals that boys born in 2045 can expect to live 90.1 years, while girls born in the same year could live until 92.6.
If you’re living longer, you may need a larger pension pot to support your desired lifestyle, or to cover any later-life care costs. As such, returning to the workforce could bolster your retirement fund and make it last longer.
Similarly, you could mitigate the need to draw from your pension, and may even be able to continue contributing by working during retirement.
However, it’s important to remember that you could face restrictions on tax-efficient contributions if you’ve already started drawing your pension.
Indeed, you may be subject to the Money Purchase Annual Allowance (MPAA). This limit restricts the amount of money you can save in your pension tax-efficiently if you’ve started drawing from it. This stands at £10,000 in the 2023/24 tax year.
So, if you’ve already accessed your pension, you may only be able to make contributions up to the MPAA each tax year without an additional tax charge.
Returning to the workforce could even help your mental wellbeing
While the financial benefits of unretirement may be more apparent, there are even some considerable advantages to your mental health.
This is because, when you stop working, your life could slow down. You could lose your routine, and may even find that you’re bored more often. This can often lead to depression during the next phase of your life.
In fact, a report from the Institute of Economic Affairs found that self-reported depression increases by 40% during the first few years of retirement.
Meanwhile, introducing structure to your life by returning to the workforce could improve your mood and general mental wellbeing, especially if you find you’re missing the bustle of a workspace.
Moreover, you may become lonelier during retirement since you aren’t spending as much time with colleagues. If you return to work after initially retiring, you could spend much more time with other people, benefiting your mental health.
It’s worth noting that you likely had a reason to retire in the first place, and heading back to the workforce could negatively affect your work-life balance. As such, it’s essential to strike a balance between your objectives and work.
Regardless, if your work and personal identity were previously linked, unretirement could give you a new purpose and lease on life, offering an invaluable opportunity to keep yourself busy and interact with others. This could, in turn, improve your mental wellbeing.
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We can help you feel more confident about retirement if you’re still unsure whether you’ve saved enough to support your dream lifestyle.
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A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.