FOR those of you who follow my column regularly, you may find this headline rather contradictory to my usual topics. You might be asking yourself “shouldn’t I be planning my finances today to avoid working during my retirement years?”
You are absolutely right.
Before we go further, I’d like to clarify that the topic of “working during retirement” that will be discussed here is not for the purpose of generating income.
It is never a good idea to rely on the possibility of working in your retirement years as a primary source of income, as there is no way of knowing your state of mind and health in those years, and whether you will possess the energy and enthusiasm to continue performing at work.
It is therefore always a primary goal in financial management to plan to achieve financial freedom (the ability to continue your lifestyle without relying on active income) by the time you hit retirement at 60 years of age. By this time, working should be a choice, not a need - more on this below.
Living your retirement years while being financially free is a great achievement. You’ve worked hard your entire life trying to support yourself and your family, you definitely deserve a break.
But life doesn’t stop there. While you no longer have to work for your living expenses, many find themselves at a loss of what to do after enjoying the initial few years of their retirement break.
Furthermore, with the advancement of healthcare, people are now expected to live longer. So when you hit retirement at age 60, you’ll likely be around for another 20-30 more years if you’re in good shape. What will you do with your time?
It is not unusual, therefore, to consider going back to work in these circumstances. In fact, studies show that there are several common factors that tend to pressure retirees to head back into the workforce, such as:
>Excessive boredom, which occurs when you have no concrete plans and goals for your retirement life.
>Needing space from your family after spending almost every day and night at home with them
>Running out of topics for conversations with your friends
>Missing the thrill and rhythm of working life
While these may be some of the factors that drive someone into working during a time when he or she should be slowing down, let’s not forget that working life also has its attractive offerings, such as:
>Constant source of socialisation. There are few true replacements for the type of daily interaction that one gets from colleagues. After retirement, it can be difficult to find an avenue to meet new people and expand your social circle.
>A purposeful life. Work helps some people find a sense of purpose and meaning to their life. Without this purpose to fuel you, you may find it difficult to live happily.
>Keeping an active mind, which in turn benefits long-term health. Studies have shown that people who remain inactive in their retirement years tend to age significantly faster and die sooner.
>A distraction from boredom. Not everyone has a plan or a hobby to fallback to during their retirement years. For those who have relied on work to give them motivation and structure, life in retirement can seem like a bore.
What types of work should I take on?
Working in retirement can be a very different experience from working during your prime years. The primary difference is that this time, you do not have to restrict yourself to a certain type of work because of economic factors.
You can now try out other areas of work that you may have been curious to explore, but were not in a position to try because of economic factors. And if it doesn’t meet your expectations, you can always switch to something else easily.
Some of work options that people take on during retirement are:
>Extension of your current career - This is one of the more popular options for retirees. After spending your life building up your career or experience, this may seem like a more natural way of continuing to work while in retirement. Only this time, you will be able to shape your work into an arrangement that suits your level of comfort. For example, if you were working in a corporate job, you may be able to adjust your hours into a part-time work arrangement, or even pivot into a consultant depending on the experience that you’ve accumulated. If you were running a business, you could look to reduce hours and set less stressful goals for you to achieve.
>Exploring a new line of work - If you are tired of the line of work that you used to be in, this is an excellent time to explore something new. For example, if you were previously working an executive job in a corporate environment, you may find it refreshing to roll up your sleeves and try something with your hands instead, like a working with food or woodwork.
>Starting your own business - This is also a time you can consider venturing into your own business. Setting up your own business can be a rewarding and empowering experience, as it gives you a sense of control to visualise some of your dreams. However, this has its own risks, as it will consume some of your savings you have set aside for your retirement.
>Volunteer work - Volunteering in a non-profit or a charity is also a great option for those looking for something with less commitment of a career or business, while being a rewarding experience. Volunteering can give you a sense of purpose and legacy as you’ll be contributing to helping people who are in dire need of it.
Whichever work you choose to take, make sure to ask yourself these questions to ensure that you embark on a path that is suitable for you:
>What tasks do I enjoy doing?
>What type of impact do I want to make in my work
>What kind of stress levels am I willing to tolerate?
>What past skills and experience can I harness for my work?
>How many hours am I willing to commit to work?
>What kind of financial commitments would I have to fork out for this work?
Working should be a choice, not a need
Lastly, before making the choice to pursue any of the above options in your retirement years, make sure you have examined the impact of working onto your bank account balance, and budget out the necessary expenses, taxes, and other costs that will be involved.
It is important that you see this opportunity to work in retirement as an option, and not a must.
To ensure that this is the case, make sure that you have drawn out a proper retirement plan at least 20 years before you plan to retire. The longer time you have left, the more you can prepare and accumulate before your retirement.
The Employees Provident Fund (EPF) has suggested that the minimum savings you should accumulate in your account by age 55 is RM228,000. However, according to their numbers, only 18% of contributors managed to accumulate that amount or more. On top of that, 70% of those who withdraw their funds at 55 often use up their EPF savings in less than 10 years.
To enjoy a comfortable retirement, do regular pulse checks every year to ensure you are on track to your retirement goals. Just like how you would do a routine physical check-up to get a picture of your overall health, the same should be practiced for your financial health.
There are two ways I recommend you do this:
Option 1 - Download the free iWealth app which will guide you through a self-evaluation to see if you have adequate assets to sustain you during retirement, or
Option 2 - Consult a licensed independent financial advisor.
If you are not too familiar with financial jargon or do not have the time to do a detailed self evaluation, consult the expertise of an unbiased, independent financial advisor to evaluate your retirement goals and give you peace of mind for your well-deserved golden years that’s to come.
Yap Ming Hui is a licensed financial planner. The views expressed here are the writer’s own. Any reliance you place on the information shared is therefore strictly at your own risk.