Almost half the people who return to work after retiring don’t do it because they miss their coworkers. They’re doing it because they need the cash. Joe Anderson, CFP®, and Big Al Clopine, CPA, break down the four un-retirement mistakes that send retirees back to the grind, the fixes for each, and the 90-day roadmap to follow if going back to work becomes your plan B.
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Un-Retirement Mistakes and Fixes:
- Why 1.5 Million Retirees Went Back to Work
- Mistake #1: Splurging
- Mistake #2: Inflation
- Healthcare Costs and Market Timing
- Mistake #3: Healthcare, IRMAA, and Long-Term Care
- Mistake #4: Sequence of Returns Risk
- Your 90-Day Unretirement Roadmap
- Can Cutting Spending 10% Keep You Retired?
- What a Side Hustle Actually Pays
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Transcript:
Joe: We’re talking about people that retired, then all of a sudden, guess what? They find out that they have to go back to work. They don’t have enough cash to pay those bills. Don’t be part of the unretired. Learn about the mistakes that they make and the fixes that they need to do. Hey, welcome to the show, folks. Show’s called Your Money, Your Wealth®. Joe Anderson here, CERTIFIED FINANCIAL PLANNER®, president of Pure Financial Advisors, and I’m with the big man, of course, Big Al Clopine. Hello, Big Al.
Al: How you doing today?
Joe: I’m doing fantastic.
Al: Me too.
Joe: You know, a lot of people, they retire, and guess what?
Al: They gotta go back to work.
Joe: They gotta go back to work. How terrible is that?
Al: It wouldn’t be my first choice. You
Joe: know-
Al: Or anyone’s.
Joe: Yeah, exactly. Here’s the headlines, folks. It’s not a theme anymore.
It is absolutely a trend. Inc. Magazine, “Unretirement is quietly becoming the new normal: Why unretired seniors are picking up the gig work.” Right? You retire, you think, “Hey, you know what? I’m in my glory years.” But now you’re back to the grind. You don’t want this to happen. It’s just small, simple mistakes that we’re here to help you with. That is today’s Financial Focus.
All right, the unretired. People go back to work all the time, but almost 50% of people that are going back to work, they need the cash. It’s not because they miss their coworkers. It’s not because, hey, they get put on a board of directors. It’s because they need the money. Let’s plan right, and who else to bring us into this is Big Al.
Al: Wow, Joe, that’s a lot of people going back to work. I know sometimes they go back to work ’cause they miss people and challenges, but half going back to work just ’cause they need the money? So let’s get into the mistakes that people are making, and maybe even more importantly, how to fix it, how to change it.
Why 1.5 Million Retirees Went Back to Work
And then if you still have to go back to work, let’s talk about preparing to go back to work, whether it’s full-time, part-time, gig economy or so forth, so that you can actually retire successfully.
Joe: Yeah, I think the mistakes that people are making are not huge. It’s just being able to kind of tone this down a little bit and figure out how to fix it. But more importantly, if you do have to go back to work, you know, it’s like, okay, how do you get prepared to do so?
Al: Right.
Joe: All right, the pandemic. This was a big push. Look at this. 2.4 million people retired in 2020, right in the pandemic. You know, it’s like, stay at home. Hey, I’m comfortable. I’m buying another house.
I’m moving to the desert. But look at this. In 2022- One and a half of them went back to work. They were like, “Well, maybe I cannot do this,” right? “I need to go back to work.” What do you think is going on here? Well, biggest mistakes is cash flow, inflation, healthcare, and market volatility. Al, let’s break these down.
Al: Yeah, so let’s start with cash flow. So, you know, you gotta think about what you’re spending. A lot of people don’t know what they’re spending, and so you gotta put pen to paper, look at your bank statements, look at your net pay. Try to figure out what you’re spending. More importantly, figure out the different categories between needs and wants, right?
There’s things that you have to pay for, your mortgage, your utilities, your food, and then wants, like, you know, clothes and vacations, things like that. Make sure you understand the difference so that if you’re spending too much, you can cut back on some of the wants. Joe, inflation’s another one. A lot of people ignore inflation, and, you know, we usually use 3% or 3.5%, but it’s, it takes up a lot of your cash flow over time.
Joe: Yeah. Well, it depends on when you retire, too. Just think, most of you are going to have a 20, 30, maybe even a 40-year retirement, so the cost of goods and services that you’re buying today, of course, is gonna increase over time. Looking at healthcare, if I retire early, that healthcare cost is gonna spike in my overall budget.
And of course, looking at the market, how is the portfolio going to handle, you know, added expenses, inflation? You have to take risk to, um, outpace inflation. But also, if I take too much risk, as I’m trying to create the cash flow from the portfolio, so you have to put all of this together.
Retirement Mistake #1: Splurging Right After You Retire
Let’s look at mistake number one, the splurging.
Right away, “Hey, I retired. Now I can do all the things that I really wanna do.” Maybe I spoil my wife with some luxury items, or maybe I buy that sports car that I always wanted. Expensive trips, hey, you know, we have the time. Let’s go on that African safari, or let’s go on a month-long cruise, or whatever the case may be.
Or maybe that second home. Hey, I live in Southern California. Maybe I wanna purchase a place in the mountains. I don’t know. Or supporting your adult children. They’re still on the payroll. But guess what? You’re not working anymore. Cash flow might be a little bit tight, so you might have to think about, hey, can I continue to splurge with- The amount of assets that I have, if you can, that’s great, but a lot of us probably have to reign this back in.
Al: We’re not necessarily saying don’t spend and have a good time. Just be careful. Be aware of how much you really can spend. So thinking about the fix for this is itemizing your expenses, taking a look what you’re spending money on. Try to figure out ways to, reduce those expenses and make sure you know what you’re spending money on.
Vacations, yes, do them, but maybe you go off-season because it’s a lot cheaper. And some people decide to downsize. They sell their home. They’ve got equity in their home. maybe they wanna move to a different area. Maybe they wanna be closer to the kids. Maybe, Joe, they even wanna live in a foreign country.
Joe: Well, that’s bad. that would save you a couple of bucks.
Al: It could.
Retirement Mistake #2: Underestimating Inflation in Your Budget
Joe: all right. Let’s go to mistake number two, inflation. Look at this. The CPI, consumer price index, increased almost 40% over the last 10 years, from 2016 to 2026. I think we’re all feeling the impacts of inflation. If you go buy your gallon of milk today, it feels a lot more expensive today than it did last year, especially, you know, 10 years ago.
So but understanding how you put inflation into your overall budget is the key because prices will continue to rise, so you wanna make sure that you plan for that. So Al, what’s the fix?
Al: Again, go back to es- estimating your monthly spending, but then add an inflation factor, like 3% or 3 1/2%, whatever makes sense for you.
Look at your fixed income. Pensions, do they have a cost of living? Social Security has a cost of living, but it doesn’t always necessarily keep up with the real cost of living. And make sure that you’ve got investments that can beat inflation, like stocks, not just all your money in a checking account or CD, ’cause you’re probably not even gonna keep up with inflation.
Joe: All right, folks, if you need help with this, you know where to go. Go to YourMoneyYourWealth.com. Click on our special offer. It’s our most popular guide ever. It’s The DIY Retirement Guide. You know what DIY means? Do it yourself. If you wanna do this yourself, that’s a good place to start. You know your situation better than anyone, and you probably care about your situation more than anyone, so why not get started yourself?
DIY Retirement Guide. Go to YourMoneyYourWealth.com. Click on that special offer. Now, when we get back, we got a few more mistakes and fixes for us to share, so you don’t wanna miss this. Show’s called Your Money, Your Wealth®. We’ll be right back.
Joe: Hey, welcome back to the show. We’re talking about people that retired, then all of a sudden, guess what? They find out that they have to go back to work. They don’t have enough cash to pay those bills
If you need more help, you know where to go. Go to YourMoneyYourWealth.com. Click on our special offer. It’s a do-it-yourself retirement guide. Start your planning right now. You can download it in the comfort of your home. Start your planning today. All right, let’s see how you did on the true/false question
Healthcare Costs and Market Timing: Two More Un-Retirement Mistakes
Al: It costs over $270,000 to cover out-of-pocket healthcare costs for more than 20 years in retirement, 65 to 85, $270,000. Joe, true or false? I think that’s true, ’cause we hear big numbers like that all the time.
Joe: Yeah, it’s probably more than that for some.
Al: For some, yeah.
Joe: Yeah, but y- you know, it’s a little misleading in a sense when they put these big numbers out there.
Sure. Because this is over a 20-year period, so it’s not like, “Hey, I have $500,000 saved for my retirement, but 300,000 of the five is gonna go to healthcare, so I only have a few hundred thousand. That’ll last me 30 years.” That’s not necessarily the case. This is just looking at over that 20-year time period, you know, you have co-pays, you have premiums, and things like that each year or each month, and if you add that up over 20 years, it’s roughly a couple hundred grand.
Al: Yeah, and that’s a good way to think about it, because when you break it down that way, 270,000 over 20 years, that’s probably around $6,000 per person per year. A little bit more easy to swallow.
Joe: Yeah. 6,000’s a lot easier than 270. let’s go to the mistakes. All right, so we got higher healthcare costs.
Retirement Mistake #3: Ignoring Healthcare, IRMAA, and Long-Term Care
Okay, we’re living longer. This is a really good thing, right? We’re living longer. We can enjoy our lives, our loved ones that much longer. 65-year-old life expectancy is 85, and if you’re married, it’s even higher than that. Medicare premiums, right? More income, higher the cost. So you have to understand Aunt IRMAA.
So what is that? Well, the more dollars that show up on your tax return, the higher your Medicare premiums. So it’s always looking at the best way to create the income can also reduce some of your overall cost. Long-term care, 70% will need it. But this is a little scary statistic here. But you might need it just for a couple of days or a couple of months or a couple of weeks.
You know, some will need it for several years. But just understanding, hey, do you have a plan to take care of some extended medical need, right? Um, and then finally, looking at the nursing home, 11,000 a month, Al.
Al: That’s a lot. It sure is.
Joe: So it’s just putting this in your overall strategy and understanding that, hey, we’re living longer.
Since we’re living longer, we’re probably gonna need some sort of long-term care assistant at some point in our lives. And then also the Medicare premiums, there’s ways to joggle things around maybe to l- reduce those overall premiums, but putting this in your strategy, I think, is a mistake that people don’t necessarily do.
Al: Yeah, so let’s talk about how to fix it or how to think about this. So if you’re working and you have a high-deductible health insurance plan, you would qualify for an HSA account, which basically means you can put money into this account and use for medical expenses. Doesn’t have to be this year. It can be 20 years from now, 40 years from now.
And you know what? You put the money in, you get a tax deduction, it grows tax-free, and as long as you pull the money out for medical purposes, it’s tax-free. It’s a great way to, save money on medical deductions in the future should you need it. Long-term care insurance, that’s another one. So for some people, you’ll go ahead and get it.
Maybe the, the sweet spot is age 55 to 60, but people get it earlier, they get it later. It may or may not make sense for you. But at least you wanna have a plan. If you need long-term care, how are you going to fund it or how are you gonna think about it? make sure you have some Roth IRA money because you have to pull that money out.
It’s tax-free. You’re not forced to pull it out. And probably maybe the most important thing on this is try to stay healthy. You’ve heard this before. Exercise, diet. Eat right, Joe.
Retirement Mistake #4: Sequence of Returns Risk
Joe: Yes, sir. Mistake number four. What happens here? The market kind of blows up as soon as you retire. This is called sequence of return risk.
Any well-thought-out plan, we’re going to run a certain target rate of return on your overall investments, and a lot of people might use 6%, 8%, 4%. It doesn’t necessarily matter. But what I can tell you, al- I can almost guarantee you, is that you’re not going to get that 6% rate of return every single year.
Some years you might get 12%, some years you might get negative 5, and then some years you might do 20% and then negative 30, whatever. It’s volatility in the overall market, depending on how you structure that portfolio But what happens is that as I retire and I start taking dollars from the portfolio, and I don’t have a strategy to create the income, I don’t have any safety, like, safety buffers here, and maybe I’m all in equities because I was accumulating the wealth.
And then the market dips, and I lose 19% of those dollars. Year one, as I’m taking dollars out, it’s really hard to recover back from that. And this simple example is just saying, man, if you had a 20% loss in the beginning of your retirement, that could create a significant shortfall if you had a positive return in the overall market that first couple of years.
So it’s the sequence when the return hits the overall portfolio, not necessarily what average rate of return that you’re using in your overall strategy. So huge mistake Al, what’s the fix?
Al: So the, the most important thing is take a look at your portfolio. Make sure you have some safety in the portfolio.
Make sure you have some bonds, which tend not to go down very much. Sometimes they go up in a down market. Maybe you have some Treasury inflated protected securities. These are bonds that actually go up with inflation. Be aware of that. But most importantly, you have some safe money that if the market does go down, you pull from that, like bonds, for example, and let the market recover so you’re not taking money out of your stock portfolio.
And then make sure you stress test it. Do a Monte Carlo analysis or any number of ways to see what’s the likelihood that I’m gonna be able to get through this just fine?
Joe: If you need more help, you know where to go. Go to YourMoneyYourWealth.com. Click on our special offer. It’s a do it yourself retirement guide.
Start your planning right now. You can download it in the comfort of your home. DIY Retirement Guide, Do It Yourself Retirement Guide. YourMoneyYourWealth.com, click on the special offer and you can download it right there. When we get back, it’s our last segment, and we’re gonna prepare you to unretire.
What are the things that you’ve gotta think about? This is really important, so you don’t wanna miss it. We’ll be right back.
Joe: Hi, folks. Welcome back to the show. Joe Anderson here, certified financial planner. Big Al Clopine, he’s a CPA. Hey, we’re talking about the unretired. People retire every single day, and guess what? They go back to work a few years later, and we found out that half of them have to go back to work. They don’t wanna go back to work, they need the cash.
All right, folks, if you need help with this, you know where to go. Go to YourMoneyYourWealth.com, click on our special offer. It’s our most popular guide ever. It’s the DIY Retirement Guide. Do you know what DIY means? Do it yourself. So why not get started yourself? DIY Retirement Guide. Go to YourMoneyYourWealth.com, click on that special offer.
How to Prepare to Un-Retire: Your 90-Day Roadmap
So we talked about mistakes, we talked about fixes, but let’s say you’ve already made those mistakes and it’s too late to fix them, now you have to go back to work. Let’s get you prepared. Al, let’s kick it off.
Al: Well, Joe, what if they don’t have to go back to work? And I think you wanna think about this first, which is what if you could cut your spending a little bit?
It can make a big difference in your money lasting through retirement. So maybe 10%, doesn’t have to be a fortune, right? Maybe you’re spending 60,000 a year, and you cut back 10%, now you’re spending 54,000. I think almost all of us can look at our spending and figure out a few things that we could still have a great life and not spending money on.
And that can, in many cases, Joe, add five, six, seven, eight years of money through your retirement.
Joe: Yeah. This is pr- um, income from the overall portfolio. So let’s say you have that million-dollar portfolio, but they could still have pensions and social security. So this is not, like, your full budget. So y- this is your distributions.
And if you can get that 6% rate of return, if you can reduce that by 10%, right, it’s another five years. So I know that’s tough to do. It’s like, man, I really enjoy the lifestyle that I have. I’d much rather go back to work and maybe let that portfolio continue to grow versus pulling money from it. So how do we get prepared?
Here’s a little list of things that you might wanna take a look at.
Al: Yeah. So if you do have to go back to work, and maybe you wanna go back to work, look at your work history. what are you good at? What have h- what have you enjoyed? What are you certified in? What are you, are kind of an expert in?
What do you do well? And then consider your network. If you know a bunch of people, you talk to them, and maybe they can put you in the right place or send you to the right people to get back in the workforce. Figure out your tech proficiency. Every few years it’s a whole different world out there.
You gotta stay updated on things. And of course, Joe, you gotta figure out your physical limitations. Some people just simply can’t work a 40-hour week, and figure out what you can do and do that.
Joe: Yeah, I think that you have to have a, like, an honest assessment with yourself, which is great because you don’t wanna be put back into the workforce working in something that you hate or that you don’t enjoy.
That’s just gonna add a lot more stress. You know, for a lot of us that do have to go back to the workforce, it’s not like, “Hey, I need to make a, a, a bunch of money.” You already retired. So going back is that you probably don’t have to replicate the exact same paycheck, right? So you can think about this maybe a little bit differently, but yeah, look at your work history.
What have you done? What were your wins, right? You already retired, and you probably already forgot about it, but yeah. Hey, do you have certifications? Do you have wins? Did you have a, a pretty nice title, you know? LinkedIn, get back in the network. There’s a lot of things that you wanna be prepared for, but I think mentally too, just get your mindset appropriate and start talking here, and then a lot of people will get pretty excited about it.
Part-Time, Consulting, or Gig Work: What a Side Hustle Actually Pays
The unretirement strategy, Al. You can go part-time, consult full-time, you pick.
Al: Well, I think that’s right. You gotta look at your situation and figure out what’s gonna be best for you based upon your financial need and your abilities and what you wanna do. A lot of people in retirement will work part-time, so they worked 40 hours a week or more during their career.
Maybe they can get by with working 10 hours a week or 15, 20, what- whatever the number is, whatever you need, right? So that you can then manage your schedule better. Some people prefer to go the consulting route if they’ve got skills that allow that, ’cause now you work as you want to or as you get jobs and things of that sort.
That can be a great way to go. Some of you may have to go back to work full-time just to cover the bills, and if that’s your case, then consider that carefully. But y’know, I think a lot of people just need a little extra income. They don’t necessarily need to work a lot more.
Joe: Yeah, and I think you do, you have to start with a n- 90-day roadmap.
So here we go. First 30 days, do your research, right? Audit your skills honestly, right? If you were a computer programmer 30 years ago, I mean, I think maybe, today it’s gonna be a little bit different, right? And run real numbers. Know the target role that you want and what the target income that you wanna r- um, wanna receive.
Networking, get back out there. Start talking to old friends, colleagues. Yeah, that’s day 31 and 60. Might take you a while to find them too, right? So you gotta start getting out there. And then day 61, now negotiate. You did your homework. You were honest with yourself. You have a self-assessment. You know what you need to do from an income perspective to kind of bridge the gap. Now you’re ready to go. And Al, let’s run an example of like, okay, well, simple things can pay quite a bit of money.
Al: They can, and so let’s just run down a few. I mean, these are just averages, but it gives you an idea. So for folks that are handymen, handywomen, if you’re working full-time, you could probably expect somewhere around $3,400 a month.
A rental host like Airbnb, something like that, maybe a little over $3,000. Pet sitter, 2,700. Delivery driver, 2,600. This is if you work full-time. Here’s where the planning you gotta figure out. It’s like, well, maybe I just need, like, 1,000 bucks a month, right? And even sometimes $500, 1,000, $1,500 a month can make a big difference in your overall situation.
Joe: Okay, so let’s say you do this Five years, you find a side gig, side hustle, and you make $1,000 a month from that side hustle. You’re 65 years old, your Social Security’s a couple thousand dollars a month, you’re spending $3,000 a month, and you have $200,000 in savings. Right, with no side hustle, that money’s gonna last me 20 years.
How about if I find that side hustle that pays me $1,000 a month, $12,000 a year? And I work that side hustle for five years, right? That’s gonna give me another five years of capital. So as you’re thinking about, “Hey, do I wanna go back to work? No, I don’t wanna go back to work.” But I think the positive, Al, if people do go back to work and find something that they really enjoy, they get out of the house, it’s a little bit more exercise, they’re using their mind, they’re meeting different people, I guarantee their life expectancy is gonna increase that much more as well.
Al: Yeah, Joe, I think that may be even the most important point here. I mean, yeah, maybe you need a little extra cash to cover the bills, but sometimes getting out and doing something on a part-time basis or a gig as needed can give your life a lot more meaning, something to get up for, something to do to keep your mind engaged. 100% agree, the, it’s it can be a wonderful thing.
Your Un-Retirement Action Plan
Joe: Let’s break down the action plan. Just understand where the money goes. Is it time to buy, you know, the luxury items or that new sports car or maybe a second home? Maybe, not. Just understand, hey, how much capital that you have, what is this stuff gonna cost you, and then, stress test this.
Look at inflation. The cost of things are gonna continue to increase. You have to look at healthcare, right? We’re all getting older, and that’s fine, and when we get older, we have some health issues. The body breaks down a little bit. Portfolio management, making sure that you have that right portfolio given your specific goals, especially as you start taking dollars from the portfolio to create that income.
But then also, you know, you got plan B, the unretirement option. If you do wanna go back to work or have to go back to work, we laid out the roadmap for you to make sure that you’re prepared, so if things go awry in your overall retirement, you don’t stress out. You got that plan B where you can jump right back in and fill the gaps.
All right. That’s it for us today. Hopefully you enjoyed the show. Our gift to you, again, is our Do It Yourself Retirement Guide, DIY Retirement Guide. Go to YourMoneyYourWealth.com. YMYW, YourMoneyYourWealth.com. Click on that special offer. It’s our gift to you today. Again, for Big Al Clopine, I’m Joe Anderson. We’ll see you next time, folks.
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