Are your clients prepared for retirement? The answer often hinges on their work situation, specifically where and how they are employed.
Recent research from the Center for Retirement Research highlights a notable trend among American workers aged 55 and older. Those who engage in remote work at least one day a week are 14.4% less likely to retire within the following year than their in-person counterparts. This finding remains consistent even after accounting for demographic, familial, and job-related factors.
Geoffrey Sanzenbacher, a research fellow at the Center for Retirement Research, notes, “Remote work remains elevated relative to pre-pandemic levels and appears to be a lasting option for many workers. Given the financial struggles of many Americans, the need to work longer is also evident. The encouraging takeaway from this research is that remote work seems to support extended careers rather than hinder them.”
Trends in Remote Work and Its Impact
While the prevalence of remote work has declined from its peak during the pandemic, it still represents a significantly larger segment of the job market compared to pre-2020 figures. In 2019, only 6% to 8% of workdays were spent working remotely. This figure skyrocketed in early 2020, but ultimately stabilized at more than double the pre-pandemic level by late 2021.
Previous studies have indicated that the rise of remote work has enabled older workers, particularly those with disabilities, to work longer. New findings suggest these benefits extend to older employees across the board, shaping their retirement decisions.
The Shift in Retirement Perspective
Financial advisers are witnessing a shift in how remote work influences their clients’ retirement plans. Many clients express a desire to keep working due to the flexibility offered by hybrid or fully remote positions. Ryan Perry, a financial adviser at Falcon Wealth Planning, observed, “In several cases, employers provided a hybrid schedule or remote work options, and clients appreciated these choices. Consequently, they ended up prolonging their careers.” This trend shows how remote work can positively impact financial stability during retirement.
Financial and Emotional Benefits
For those considering delaying retirement, the financial benefits are clear. More working years translate to additional income, creating a stronger financial foundation and alleviating pressure on financial plans. Leyla Morgillo from Madison Financial Planning Group highlights that many clients prefer maintaining at least a part-time work schedule, as it helps ease the transition to retirement and provides a sense of security during a potentially daunting change.
Beyond Financial Incentives
While additional income from remote or hybrid work can enhance a client’s financial situation, Morgillo points out that the primary motivation might stem from non-financial factors. Many retirees find value in maintaining access to workplace healthcare plans, which can often surpass what Medicare offers. Furthermore, a long-standing career can intertwine with one’s identity, making retirement a challenging emotional adjustment.
The Importance of Staying Engaged
Continuing to work can provide significant mental health benefits for retirees. Research indicates that retirement may increase the risk of cognitive decline. By postponing their retirement through remote work, clients may better protect their mental acuity. However, advisors stress the importance of discussing alternative engagement options, such as volunteering or mentoring, which can enrich their post-retirement life and fulfill the desire to contribute positively to their communities.
Balancing Work and Retirement Goals
Ultimately, while remote work offers flexibility and financial security, it’s vital for clients to remember not to delay personal goals. Lauren Lindsay of Paragon Private Wealth Management warns against overemphasizing work at the expense of life aspirations. “Time is our most limited resource,” she says. “Don’t postpone your life dreams just to keep working unless absolutely necessary.” By approaching retirement planning with a balanced perspective, clients can make informed decisions that align with their financial and personal objectives.
Impact of Remote Work on Retirement Decisions
As many older workers approach retirement age, the nature of their work arrangements can significantly influence their readiness to retire. Recent studies indicate that the flexibility offered by remote work options may lead to a deferral of retirement for many employees aged 55 and above.
Research shows that American workers in this age group who work remotely at least once a week are 14.4% less likely to retire within the following year compared to their in-person counterparts. This finding holds true even when various demographic and employment factors are taken into account. It suggests that remote work patterns are reshaping the traditional timeline for retirement.
The Shift Towards Remote Work
Since the onset of the pandemic, the landscape of work has changed dramatically. While the peak of remote work usage has declined from its pandemic heights, current statistics reveal that a substantial number of employees still engage in remote or hybrid work arrangements, far exceeding pre-pandemic levels.
In 2019, only about 6% to 8% of workdays were performed remotely. This number skyrocketed threefold in early 2020 as companies adapted to the crisis, and although it saw a notable decline by late 2021, remote workdays have stabilized at over double the rate observed before the pandemic.
Benefits of Remote Work for Older Employees
Financial advisors have noted a significant impact on clients deliberating over retirement timing, with many preferring to extend their career through remote work. Many employers now offer flexible schedules, allowing older workers to adapt their workload in a way that suits them. This has often encouraged clients to continue working longer than they initially planned.
This is particularly beneficial for individuals looking to strengthen their financial stability before retirement. Each additional year in the workforce translates to increased income and more contributions to retirement savings, which can substantially enhance overall financial well-being.
Alleviating Retirement Anxieties
The transition from employment to retirement can be daunting for many. A recurring theme among financial advisors is that their clients frequently express apprehension about losing their regular paycheck. Remote work provides a comforting bridge, enabling clients to continue earning while planning their financial futures.
Financial professionals emphasize the importance of clear communication regarding the necessity to keep working. It’s crucial for clients to understand their financial situation fully, ensuring they are not delaying retirement out of unfounded fears of financial inadequacy.
Beyond Financial Incentives
While the added income from remote work can bolster a retirement plan, there are other compelling reasons for older workers to stay engaged in their jobs. For some, the employer-sponsored health benefits may surpass the coverage available through Medicare, presenting a practical reason to maintain employment.
Additionally, many individuals derive a significant portion of their identity and satisfaction from their careers. Thus, the decision to retire isn’t solely about finances; it also encompasses emotional and psychological factors. Continued work can keep them mentally stimulated and socially connected, combating feelings of isolation that can arise post-retirement.
Mental Engagement and Retirement Planning
Engaging in work, even on a part-time basis, may contribute to cognitive health. Studies have linked retirement with a higher risk of cognitive decline, making a case for older employees to delay retirement if they find joy and purpose in their professional roles.
However, financial advisors caution against placing too much emphasis on work. It’s essential to explore various avenues for engagement, such as volunteering or mentoring, to ensure a fulfilling post-retirement life.
Conclusion: Timing Retirement Wisely
Ultimately, the decision to retire should not be rushed or dictated solely by financial constraints. Clients must assess their personal goals, well-being, and overall life satisfaction. Time is a finite resource, and it’s crucial to align retirement plans with individual objectives without unnecessary delays.
