This Is Not Your Father’s Retirement

Updated: Dec 17, 2019



Retirement trends are changing. No longer are people expected to spend their days playing golf and bridge (unless they want to, of course). ‘Vintage’ workers are starting new businesses in record numbers, staying on as consultants to their former employers and mentoring younger colleagues, joining the Peace Corps, and writing best sellers.

Several recent research reports have highlighted the trend of retirement-age employees remaining longer in the workforce, as well as younger employees planning to work at least part-time in retirement too.

With an estimated 1 out of every 3 Americans having saved less than $5,000 for retirement, and 21% having saved nothing at all, it’s no surprise that many people plan to continue working out of sheer financial necessity. But as technology continues to change the way that people work, flexible labor markets, multiple jobs, and even multiple careers over the course of a lifetime are now the norm.

Retirement has become an active stage of life. People want to remain socially connected, participate in their communities, and stay economically engaged. Fifty-seven percent of workers worldwide see themselves continuing to work as they currently are, or working part-time in transition to or during their retirement. Most are planning to do so because they both want to and/or need to work. Continuing to earn an income later in life provides an opportunity to continue saving and delay drawing down Social Security retirement benefits and savings.

Many employees realize that they are facing a financially insecure retirement. Reasons that people give for continuing to work include: not being able to afford to retire, the cost of health care, higher-than-expected cost of living, and being unable to save because of paying current expenses. Globally, workers expect they will need about 2/3 of their current annual income in retirement. Only 25% believe they will achieve this level, while a mere 13% believe they will achieve 3/4 of their required retirement income. Only about a third of employees (32%) have a backup plan if they are unable to continue working before their planned retirement age.

This is problematic because we know that although 80% of workers say they plan to work at least part-time in retirement, only 28% actually do so, according to the Employee Benefits Research Institute 2019 Retirement Confidence Survey. Employees typically stop working sooner than they anticipate because of their own unexpected health issues, to be a caretaker due to another family member’s health issues, or from being laid off.

The Bureau of Labor Statistics expects the big wave of aging baby boomers to represent the strongest growth in the labor force participation rate through at least 2024, when many boomers will have reached age 60-78. Many are expected to continue working even after they qualify for Social Security benefits.

As employers struggle to attract and retain workers, and as the number of older workers continues to be the fastest growing segment of the labor market, more companies may want to consider formally implementing phased retirement plans--something that many employees want but few employers currently offer. Working longer allows those employees who may not be financially prepared for retirement to save more through their company’s retirement plan and delay claiming Social Security benefits, using Medicare instead of their employer’s health care plan. And have the ability to keep contributing to a Roth IRA.

Offering more flexible options doesn’t have to be limited to retirement-age workers, either—more companies are offering less than 40-hour work weeks, flexible benefits, telecommuting, and remote work. With younger workers seeking greater flexibility and better work-life balance, such programs could benefit all employees, while helping employers address the retirement crisis and retain top talent at the same time.

Ideally, people want to retire on their own terms and on their own timeline. Continuing to work at least part-time allows older employees to remain physically and intellectually active and socially engaged while helping to mentor less experienced workers. And having a smaller yet steady income can allow them the freedom to pursue other interests outside of work, whether that’s traveling, volunteering, or just staying socially engaged with friends and family.

#Retirement #401k #Trends

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