Americans Thought They Had Enough to Retire—Now They're Going Back to Work

Retirement savings are being put to a new test as older Americans who once believed they had enough to stop working find themselves returning to jobs to keep pace with higher living costs, rising bills, and unexpected expenses.

The shift is visible in US labour data. In 2025, 18.4% of Americans aged 65 and older were employed, according to the Bureau of Labor Statistics (BLS). Separately, US Federal Reserve data revealed that 16% of people who described themselves as retired had worked for pay during the previous month.

Among retirees who worked for pay in 2025, around 52% said financial reasons influenced their decision, up from 45% in 2024. The share of people saying they needed money to get by rose to 30% from 25%.

AARP research published in August this year found that 6% of retirees said they had returned to work during the previous six months. Among those returning, 48% said financial concerns were the main reason.

That pressure has built as everyday costs have climbed. A BLS experimental inflation measure for Americans aged 62 and above showed prices increased by about 23% between August 2021 and August 2026. For retirees living largely from Social Security, pensions, and investment savings, that cumulative increase can fundamentally change a budget that once appeared sustainable.

Ashley Morgan, a bankruptcy attorney quoted by The Washington Post, said retirees she works with are struggling with higher costs, including groceries, property taxes, and insurance. 'You can't prepare for everything,' Morgan told the media outlet.

The Retirement Budget Can Break on Unexpected Costs

Routine expenses are only part of the equation. Home repairs, medical bills, and even supporting adult children or relatives can create large expenses that were not part of a retirement plan. A budget that works when nothing goes wrong can look very different when several unexpected costs arrive in the same year.

Meanwhile, debt can compound the problem. Federal Reserve research found that 33% of adults aged 60 and older carried a credit card balance at least once during 2025.

Will Allen, founder and financial adviser at Sentara Capital, reportedly said that retirees can underestimate how much their expenses change over time and may fail to account for the cumulative effect of recent inflation.

The issue is not necessarily that people failed to save during the working year. In some cases, the financial assumptions that appeared reasonable when they retired did not survive changing prices and unexpected expenses.

Americans Are Less Confident About Retirement

The 2026 Retirement Confidence Survey from the Employee Benefit Research Institute and Greenwald Research found that 64% of Americans said they were confident they had enough money to live comfortably throughout retirement, down from the previous year. The survey also found that two in five retirees said their overall expenditure in retirement had been higher than expected.

Healthcare is another major pressure point. Nearly six in 10 workers said healthcare costs were hurting their ability to save for retirement, while two in five retirees said healthcare expenses in retirement had been higher than expected.

Furthermore, the prospect of working longer is already becoming part of the retirement calculation. The survey found that nearly one-quarter of workers had changed their target retirement age in 2025, with most moving it later.

Most importantly, returning to employment does not automatically solve every retirement problem.

Someone claiming Social Security before reaching full retirement age can have benefits temporarily withheld if earnings exceed the applicable limit. In 2026, Social Security withholds $1 in benefits for every $2 earned above $24,480 for people below full retirement age throughout the year. However, the withheld benefits are later accounted for when the person reaches full retirement age.