Young people plan to work into retirement years

Young people plan on working well into retirement — not necessarily due to financial need, but because they want to stay active and involved. This is according to new survey results from T. Rowe Price, showing that 69% of respondents between the ages of 21 and 50 plan to work either part-time or full-time during their retirement years. Among those who plan to work at least part-time, most (75%) will do so because they want to stay active and involved; only 23% believe they will do so because they will not have saved enough money.

Of course, this is all a guessing game for respondents , but it does offer a slightly less pessimistic outlook than previously showed in other studies. The study looked at the investing practices of Generation X and Y who had at least one investment account.

“Beginning with the baby boom generation, a new vision of retirement has emerged — one that includes an active lifestyle and, for many people, continued work or even a second career,” says Christine Fahlund, senior financial planner with T. Rowe Price. “Many younger investors are ready to adopt this relatively new approach to retirement, as well. It’s encouraging that they plan to do this as a choice and not out of financial necessity. Of course, their ability to be flexible about their retirement date will require getting an early start on their savings.”

The mean age for prospective retirement age is 62, with the mean number of years expected to live in retirement at 22. And 43% expect a part-time job to be a source of income during their retired years.

“Successfully navigating retirement is, in many ways, an exercise in striking a proper balance between things like work and leisure, saving and spending,” Fahlund says. “We often recommend that people in their 60s who are on track with their savings not wait until they retire to start experimenting with activities they were planning. The transition from career to retirement can be stressful and many people struggle with it.”

Many pre-retirees have no idea what they want to do and may try something that they’ll want to change later, Fahlund says. “We believe that beginning to incorporate more leisure in your 60s, when you’re still likely to be in good health can be a fun way to make the transition from work to retirement easier,” she says. “By working a little longer and playing, investors can maintain earned income to fund their activities, hold off on tapping their nest eggs earmarked for retirement, and defer taking Social Security payments. Delaying Social Security, in particular, positions people to have potentially considerably higher guaranteed payments — adjusted annually for inflation — for the rest of their lives.”

An important caveat, Fahlund notes, is that investors who choose this approach to retirement generally should use some of the money from their additional years of salary for the funding they need, not their accumulated savings. In addition, investors should strive to put their financial houses in order before they fully retire, including paying off their mortgages and other debts and purchasing any big-ticket items they think they might need or want in retirement.

“Working and playing at the same time during their 60s won’t be the ideal approach for everyone, but it underscores the need for young investors to begin saving for retirement as early and as much as possible,” Fahlund says. “That’s the key factor in eventually having enough money to start retirement and being able to stop working at a time of one’s own choosing.”

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