Seven million people go back to work

If retirement refers to a phase in which people leave work behind, today's retirees appear to think differently. According to research sponsored by Putnam Investments, about 7 million previously retired Americans have returned to work after an average sabbatical of fewer than two years. The study reveals major changes in traditional retirement patterns. On the whole, retirees in the workplace are upbeat about pursuing their active lifestyles. Yet, this surprisingly affluent group has regrets that offer important lessons for younger workers who have time to save for retirement.

Working retirees as a group are relatively young, averaging 61 years of age, and are back at work in earnest. Overall, they're working 29 hours per week, while some are working more than 41 hours per week. They also represent an educated and highly skilled segment of the American work force.

Interestingly, most expected to rejoin the work force when they retired. On average, they stayed retired for just 18 months before going back to work. Among those who have gone back to work, 68 percent say they are working because they want to, versus 32 percent who cite financial need.

Working retirees enjoy an average household income of $86,800, which is far above the $54,200 average income of non-working retirees. Moreover, our study found that working retirees have average investable assets of just more than $400,000.

However, income and investable assets make up only one side of the financial equation. When debt is considered, it becomes clear that many retirees need to work in part because they still have sizeable mortgages
on their primary residences.

There are other equally compelling reasons retirees are returning to work. These reasons revolve around lifestyle aspirations and health care concerns. Health benefits, in fact, are a major focus for working retirees, with nearly
half (45 percent) indicating that health benefits and income were equally important considerations in their decision to return to work. An additional 16 percent of respondents said that health benefits were more important than the income they would earn.

Closely related to the goal of securing high-quality health care is the goal of living independently in retirement and not burdening one's children. Indeed, health, happiness, financial security and independence are leading goals of the working-retired.

LESSONS FOR YOUNGER WORKERS
The lessons for younger workers are clear against the backdrop of affluent retirees who have gone back to work:

• Begin saving early -- The more time your clients' money has to work for them, the larger their retirement assets are likely to be.
• Develop a plan -- Develop a plan for building the asset base that will be a major source of your clients' retirement income and ensure they exercise the discipline to stick to it. Although less than half of the working retirees surveyed have an existing relationship with a professional financial representative, those who had the highest average investable assets had worked with a professional financial representative at some point.
• Save as much as possible through their employer-sponsored plan -- If they are not maxing out their contributions to the plan, it is vitally important they consider setting this as a goal.
• Save more outside their retirement plan at work -- If they're maxing out their contributions, established a sufficient emergency cash reserve and still have extra cash flow, additional saving outside their plan will put you that much further ahead later in life.

William T. Connolly is head of Putnam Retail Management at Putnam Investments. "Working in Retirement" was conducted by Brightwork Partners in August 2005 for Putnam Investments. For more information, visit www.putnam.com.