Retire Early or Work Longer? Why More People Are Re-Thinking Their Retirement Plans

If you look at the data, there is a movement happening in the United States right now with people rethinking their retirement. Whether it’s for money, stability, or keeping busy, the day and age of crossing over to your 65th birthday and retiring is long gone and is unlikely to ever return. 

According to December 2024 data, a whopping 3.15 million people over 70 are working in the U.S., underscoring the unretirement trend. It isn’t just men either, as women are also re-entering the workforce, and this trend isn’t only specific to baby boomers, as many millennials are also planning on working longer. 

Why Are Retirement Plans Shifting Around? 

It won’t come as any surprise to learn that several factors are causing millions of Americans to rethink their retirement expectations. First and foremost is inflation, which is raising the cost of living enough to mean that purchasing power is worrisome enough that there won’t be enough money set aside to enjoy retirement properly down the road. 

In addition, healthcare costs are only moving in one direction, and it isn’t down, which is yet another reason retirement plans are shifting. Any opportunity to create a larger buffer of funds available for emergency medical costs can only help with a little more peace of mind down the road. 

Many baby boomers are also taking advantage of work that is now remote, so they don’t have to go into an office and commute anymore. When you add this to economic uncertainty and a volatile stock market, there is a cocktail mix of reasons causing retirement plans to shift. 

For millions of Americans, these factors are influencing the idea of retirement in general. Whereas retirement was once considered a “final chapter” of life where you could relax, play golf, and enjoy yourself, that is no longer true. Part-time work, volunteering, and taking classes are helping seniors stay active and in the workforce. 

Multiple Economic Factors 

Inflation and Cost of Living

Diving deeper into the specific factors affecting the idea of working longer, there is no question that inflation is the most significant factor. The erosion of our purchasing power means that what $1 buys today isn’t what $1 will buy in five years. That is straining retirees who are already concerned about living on fixed incomes. 

Even something like the rising cost of eggs has some soon-to-be retirees rethinking their plans in the hopes of building a more significant nest egg. Unfortunately, this will very much influence those on fixed incomes like Social Security or those with limited savings who don’t have a large 401(k) account to fall back on. 

Job Market Dynamics

Looking at the job market, you have any number of jobs in the gig economy that are enabling those who might have otherwise retired early to keep working. Verifying this line of thinking is AARP, which says that over one-quarter of Americans aged 50 and older are doing some type of freelance or gig work. Building on this, you realize that over 20% of ride-hailing and delivery drivers are believed to be 50 and over.

While it’s true that layoffs and/or ageism could be pushing some who still want to work out of the workforce, there is no question that economic conditions are very much impacting the stability of being employed today. When you consider that this also means there is an effect on income potential because of current economic conditions, it’s a dual-edged sword that’s hard to ignore. 

Healthcare Costs 

Arguably, one of the biggest benefits of staying in a full-time role and working longer is the advantage of employer-sponsored insurance. Early retirees must plan for medical costs on their own, especially if they choose to retire before turning 65 and qualifying for Medicare. Even with Medicare, supplemental plans are still expensive to help offset what Medicare doesn’t support. 

If you delay retirement, you reduce your out-of-pocket costs, which could be significant if just one medical emergency occurs. The unfortunate reality many who are close to retirement face is the fear that they could be one medical bill away from not being able to travel or that if they need long-term medical care, it’s going to be near unaffordable. 

Before Deciding to Retire Early

Financial Preparation 

If you look at your level of financial preparedness, the first thing you want to do is assess what your level of savings are, the type of investments you have, and if there are any passive income streams available. If you do retire early, you need an even larger nest egg than someone choosing to retire at 65 or 67, when things like Social Security mature to 100% and Medicare kicks in. Working with a financial advisor and creating a detailed budget are two of the best things you can do to feel comfortable. 

Lifestyle Goals

If you have the means to retire early, you need to think through what this means for your life. One of the reasons more people are rethinking retirement plans is because they are done with the rat race and want to wake up and travel sooner or enjoy their hobbies more. However, you also have to consider that retiring early can lead to faster boredom without a daily job schedule. This is another double-edged sword as millions of Americans stay employed to avoid boredom. 

Emotional Readiness

Millions of Americans would consider their work part of, if not their entire identity. For this reason, you have to consider whether you will feel isolated without this part of you. This is where part-time work as a consultant or in retail comes to mind, or even volunteer work, so you still have a sense of purpose. 

Before Deciding to Continue Working

Income Growth

When you look at job security and benefits like employer matching 401(k) accounts, it’s hard to walk away from income during market volatility and inflation. The longer you continue to work, the longer you delay tapping into retirement funds, which means your money is working and compounding for you longer. 

Work-Life Balance

Ask yourself, are you happy with your work-life balance? If the answer is yes, keep going! If the answer is no, you might want to consider a part-time role that allows you to scale back on the hours you are working but still allows you to have a sense of purpose and a feeling of achievement. Of course, depending on age, you must consider how long you can physically handle a commute and day-to-day office grind. 

Healthcare 

If you are someone who does decide to keep working, you have to factor in how long this is going to impact your quality of life. Will staying in the workforce longer affect some of the best years you have to travel and enjoy daily activities, or will you retire when your body can no longer handle this level of retirement? It goes without saying that stressful jobs will and can affect your lifespan. 

This Is A Personal Decision 

There is no question that this is a very personal decision and one that requires a lot of thinking about your family, those who depend on you financially, and your financial risk tolerance. Unfortunately, there is no one-size-fits-all answer about what you should do, as the choice requires a specific look at your own aspirations, health, and finances as you weigh pros and cons. 

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