Hammered by Inflation? This Could Keep Retirees From Running Out of Cash

Retirees who find themselves hit by higher prices, lower stock returns and big health care bills might consider boosting their bank accounts by heading back to work – and employers are waiting to welcome older workers back with open arms.

Where retirees and older workers once saw recruiters pass on anyone with a little gray hair, record-low unemployment and the changed post-pandemic work environment have changed that attitude. Now so-called returnships, paid internship opportunities geared toward retirees to return to the workforce, are in vogue.

And this return to work among retirees could be an important linchpin in their retirement plans.

If you want added guidance on navigating retirement or how a returnship might affect your financial plans, consider working with a trusted financial advisor.

“These employees are valuable because they are seasoned, and that’s not always easy to find today,” Charlotte Flores, vice president of HR at Dallas-based national apartment management firm BH Cos., told the Society for Human Resource Management. Explaining the renewed focus on workers older than age 55, Flores added, “if you have someone with 20 to 30 years of property management experience, who wouldn’t want to keep that kind of talent?”

Of the 5 million people who left the labor force during the pandemic, more than two-thirds were older than 55, according to research from Goldman Sachs. Now, with five job openings for every three job seekers, employers are not only eager to hire experienced older workers, but they’re also open to bringing in retirees who’ve been out of the workforce for several years.

Companies ranging from investment bank Goldman Sachs and accounting/consulting giant Accenture to tech giant Microsoft and retail powerhouse Amazon have crafted returnships. The programs are designed to give returning workers training, mentoring, a chance to learn or brush up on skills and lessons on how to navigate the current work culture. The trend is so strong that there even are “career-reentry” firms that specialize in connecting employers with returning workers, such as iRelaunch, which works with 70 companies offering returnships, including posting openings.

Other resources include this list of companies that have pledged to AARP to promote equal opportunity for all workers, regardless of age. There’s also YourEncore, which connects corporations looking for skilled workers and experts for part-time work. PatinaSolutions.com works with executives with at least 25 years of experience willing to work for a previous employer. Of course, a first contact to consider is one of your own previous employers.

In any circumstance, going back to work to delay or reduce withdrawals from retirement accounts not only stretches out your retirement nest egg to lessen your longevity risk. But when markets are down, using a paycheck to put of withdrawals also reduces your exposure to sequence-of-returns risk. That’s the deep cut to your portfolio that happens by taking cash out of a portfolio reduced by market losses. For early retirees, that kind of hit can be especially damaging to their long-term financial future. At the same time, it’s easier for younger retirees to return to work now rather than waiting to see if their investments will recover.

For retirees who aren’t yet claiming Social Security, returning to work can allow them to further postpone starting payments, resulting in a larger monthly benefit check for the rest of their lives. Although you can claim benefits as early as age 62, those payments can be as much as 30% less than what you’ll receive at your full retirement age, which is between 66 and 67 years old. In the case of retirees who have reached their full retirement age but haven’t started payments, each additional year of delay increases your payout by 8% each year.

If you are receiving Social Security benefits, returning to work can trigger taxes on your benefits, on top of your earnings from work. If you’ll reach full retirement age after 2022, Social Security will hold back $1 in benefits for every $2 you earn, once you earn more than $19,560. If you’ll hit full retirement age in 2022 you’ll give up $1 in benefits for every $3 you earn above s $51,960. In the month you reach your full retirement age and afterward, however, the earnings test vanishes and your monthly benefit will be increased permanently to account for the months when your benefits were withheld. (If that sounds complicated, it is, but you can check your own situation with SmartAsset’s Social Security calculator.)

Other financial considerations for returning to work include considering any related costs, such as commuting, lunches and work supplies, tools or clothing, so check your budget to see just how much you’ll net when you start collecting paychecks again.

Bottom Line

Returnships are increasingly popular ways for retirees to reenter the workforce amid economic challenges, including high inflation and a down market. These paid internship programs geared at adults who have spent plenty of time in the workforce can help seniors in particular lower withdrawals from their retirement accounts to preserve their nest egg and also build up additional savings as they stay active and engaged while building new skills.

Tips on Retirement

• Consider working with a financial advisor about the advisability of working in retirement. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

• Do you want more information on your social security benefits? SmartAsset’s Social Security calculator can help you out. Also, SmartAsset’s retirement guide can help you navigate the maze of retirement benefits and financial planning. Check it out today!

• Want to find other like-minded peers who are working? Find out where seniors are staying in the workforce the most.

Photo credit: ©iStock.com/Edwin Tan, ©iStock.com/yacobchuk

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