The idea of leaving work behind when you reach the State Pension Age is falling out of favour.

For some, the cliff-edge approach; where you work full-time until abruptly stopping and never working again is an ideal way to end their employment. For others, working part-time, or even continuing to work on a full-time basis may be more enjoyable.

Of those reaching 65 this year, 50% will continue to work in some way, according to Prudential. This practice has been dubbed ‘pretirement’, a term used to describe easing into retirement, by working on a full, part-time, or consultancy basis even after the State Pension Age has passed.

Why continue working in retirement?

Unfortunately, some people may have no choice but to continue working into later life to maintain a liveable income. But, for those who are not bound by money worries, there are a range of reasons why you might choose to continue working, whether full-time, part-time or on a consultancy basis.

Let’s look at four of them:

1. Staying active and involved in things you care about

54% of those who may decide to continue working have their mental and physical agility in mind.

Keeping your mind and body active can help you to stay healthy for longer.

From another point of view; your interests don’t stop being relevant when you hit a certain age. If you have been passionate about your career and the industry you work in until this point, that is unlikely to suddenly change. If you are not ready to step back from your role and profession, you may decide to remain involved, even if it’s not full-time.

2. Maintaining the social aspect of working

Maintaining a healthy social life and retaining close relationships with friends, family and colleagues can help to keep the brain active and sharp, making sure that your quality of life remains high for as long as possible. (Source: Age UK)

On top of this, approximately 1.2 million older people suffer from ‘chronic loneliness’ and half a million spend every day alone. (Source: Jo Cox commission on Loneliness)

Of course, there are other ways to remain social, such as attending clubs, groups or even arranging your own days out with friends and family. However, if you choose to stay in work, you can benefit from both the social aspect and additional income each month.

3. A reason to leave the house and have a routine

According to Prudential’s research, 26% of those due to retire this year don’t like the thought of being at home all the time. Even part-time, or consultancy work is an excuse to get out and about and make sure that you do not let yourself become reclusive.

Of course, you may not have an issue with leaving the house, especially if you are an active and sociable person, but it could be just another advantage to remaining in some form of work after reaching the State Pension Age.

4. Making money from a hobby

Continuing to work may not necessarily mean staying in the same role as you are currently in. You may wish to use the extra free time retirement affords you to hone a skill and generate extra income from your hobbies.

This could include selling your creations at craft events, or maybe even using some of your retirement capital to start your own business, if you have the extra security of a decent retirement income or pension fund. 19% of 2018’s retirees are hoping to do this.

Reaching your retirement goals

Whether your dream retirement involves working or not, the most important thing is that it is in your control. And the main factor affecting that is your finances.

For continued employment to truly be a choice, you need to ensure that you have enough in retirement income to support yourself, without working. That way, any money you earn through employment, hobbies or business ventures is a bonus for you and your family.

So, what can you do to make sure that you are on track to a financially stable retirement?

  • Find out what your current strategy will give you: Accounting for both your personal pensions and the State Pension you will receive, use forecasting to work out how much you are likely to have when you reach State Pension age. You can use online calculators for this:

Click here for the State Pension calculator.

Click here for a workplace pension calculator.

Alternatively, get in touch with us, and we can do it for you, taking into account your personal circumstances.

  • Account for the effects of health, location and life expectancy: Many things will affect the income you need to live the lifestyle you want in retirement. And, in turn, that will affect the amount you need to have in your pension fund when you reach retirement age.

Illnesses and injury may affect the cost of living in retirement, as you may need to pay for medication, treatments or equipment, on top of the normal expenses associated with your desired lifestyle. Furthermore, if you require long-term care, you could face costs of more than £1,000 per week, which will have a large impact on your financial plan.

Estimated life expectancies are a useful tool when planning your retirement, but you must consider the possibilities of reality telling a different story. That could mean outliving your life expectancy, or, in some cases, having a much shorter retirement than expected.

You will need to ensure that you have the financial provisions in place to support you for the rest of your life. With more and more people reaching ages beyond 100, you could be headed for a retirement lasting more than 35 years!

  • Make sure you have a buffer: Life is full of unexpected twists and turns, and it is not unusual for unexpected costs to turn up out of the blue when there is an emergency. Having a plan in place for such an event is essential if you want to overcome challenges and remain financially stable throughout retirement.
  • Adjust your strategy if necessary: By now it should be clear if your current strategy is not going to provide enough money in retirement. If so, it is time to decide how you will make up the shortfall. You have a few options to make your plan work including; raising the amount you put into your pension each month, delaying your State Pension to increase the amount you receive in later years and lowering your expectations to meet the finances you will have available.

    Of course, if you are planning to work past the State Pension age, you can use any income from that to give your finances a boost, but ideally, it shouldn’t be something you are relying on.

  • Talk to a professional: Get in touch with us for help with retirement planning or making work-related decisions. As independent financial planners we can offer knowledge, experience and advice which will help you to make the best decisions for your financial future.

To get started, contact us on 01664 77 88 99.