Working Longer Is Likely a Necessity for Most People in Retirement: Part 1

Updated: Dec 17, 2019



With Americans’ documented lack of retirement savings, it’s no surprise that most people are planning to work past 62, the age at which everyone is currently eligible to begin claiming Social Security benefits. But there’s a hitch. While 79% of workers plan to continue working at least part-time in retirement, in their most recent annual survey the nonpartisan Employee Benefits Research Institute reports that only 29% of employees actually did.

This gap between the expectation of continued employment income and the reality of sudden job loss contributes to the retirement crisis. Although many people say they plan to wait until their full retirement age to claim their Social Security benefits, the most popular age for doing so is—you guessed it—62. Only 4% of women and 2% of men wait until age 70, when benefits are maximized.

The reasons for the gap between retirement expectation and reality are varied, but have this in common: many Americans find themselves retiring unexpectedly. A large percentage of retirees (48%) leave the workforce earlier than planned, for reasons including health problems or disability, changes at their employer, such as downsizing or business closure (26%), and caring for a spouse or family member. A smaller number of retirees do mention positive reasons for retiring early, such as being able to afford an earlier retirement or simply wanting to do something else (24%). The latter are often among those who go back to work or start a business out of a desire to remain productive.

‘Bridge’ jobs frequently fill the gap between a full-time, wage-and-salary job and full retirement from the workforce, and can be either full-time or part-time. For many who are approaching the usual retirement age, a bridge job can be an extension of current work that helps to ease the transition into retirement through offering a less stressful or more flexible job, and adapt to changing health status or caregiving needs. Others may use the bridge job to pursue a second career, or launch their own business. The Center for Aging and Work at Boston College reports that the majority of older Americans with career jobs retire gradually, in stages, rather than all at once. About 60% of those leaving a full-time career job after age 50 and about 53% of those leaving after age 55 moved to a bridge job rather than directly out of the workforce.

Despite employment law that prohibits discrimination on the basis of age, some employers use tactics such as layoffs and eliminating positions to discard older workers and hire younger, lower-paid ones instead. In a survey conducted by AARP, more than 50% of people over the age of 50 reported they had either been subjected to age discrimination or had witnessed it at work. At the same time, four people out of every five who are older than age 50 report that they will need to delay retirement and continue working.

Retirees who do continue to work choose to do so for multiple reasons as well. The EBRI survey also reports that financial reasons were a significant motivation, such as wanting additional spending money, or simply needing money to make ends meet (42%). Other financial reasons included a decrease in the value of savings or investments (23%) or to keep health insurance or other work-related benefits (13%). The latter is frequently cited as a motivator for employees who have not reached 65, the age at which they qualify for Medicare, to keep working longer than they might like. Many retirees continue working for personal reasons as well, such as staying active and involved (90%) or because they enjoy it (82%).

Analyzing Bureau of Labor Statistics data, the Pew Research Center reports that the percentage of workers age 65 and older is increasing--more than at any time since the turn of the century. In May 2016, 18.8% of Americans ages 65 and older (nearly 9 million people), reported being employed full- or part-time, continuing a steady increase since May 2000, when just 12.8% of 65+ Americans (about 4 million people), said they were working. These older employees are adding substantial numbers to the US workforce. According to the Federal Reserve, all of the net workforce growth since 2000 (approximately 17 million people) has consisted of people over 55. The report also speculates that with current demographic trends, workers 65 and older are likely to become an even larger share of the workforce over the next 20 years.

That’s a good thing. Economists are already forecasting a shortage of skilled labor across many jobs such as engineering and nursing as soon as the year 2020. The Federal Reserve Bank of Atlanta notes that while the economy continues to expand, the current labor market is tight and employers are experiencing challenges finding qualified workers across multiple skills and sectors, particularly in manufacturing and construction labor. In fact, the shortage of qualified workers is starting to constrain the economy as a whole.

So, older workers both need to and want to stay employed, and employers are experiencing a shortage of qualified and skilled labor. It sounds like a perfect match—a win-win for both older workers and employers. Then what’s the problem? The persistence of outdated myths about older employees, which I’ll explore in my next post.

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