By Sara E. Rix
Extended employment is going to be a more important component of retirement planning for a growing number of older Americans. With fewer employers offering defined benefit plans or retiree healthcare, do-it-yourself retirement has become the name of the game.
To supplement Social Security benefits, more workers will have to save longer—and more. This will require consuming less in the pre-retirement years, making do with less in retirement, working longer or some combination of all three. Fidelity calculates that more than half of households are not on track for accumulating enough to pay their essential expenses in retirement. Working longer can change that.
Working Longer Can Pay Off
It pays to work at older ages, giving pre-retirees more time to save, more time to contribute to a 401(k) and get an employer match, if offered, and less retirement time to finance. Taking Social Security at age 70 can result in monthly benefits that are more than 70 percent higher than they would be at age 62. This can be a boon to those who live to advanced ages, exhaust much of their savings and-or face high health or long-term-care expenses. But it isn’t necessary to wait that long—even an additional year or two of continued employment can result in higher incomes and thus more consumption options, according to the Center for Retirement Research at Boston College.
After decades of decline, older Americans have already begun to push back their retirement date. Over the past 30 years, the labor force participation rate of people ages 65 to 69, for example—an age range long viewed as “retirement age”—has risen from 18.4 percent to 32.1 percent, according to the U.S. Bureau of Labor Statistics (BLS).
AARP’s 2013 Work and Career Study says the majority of working Americans contend that they expect to work in retirement (http://goo.gl/tD03PK). However, working longer often is easier said than done, and many older workers leave the labor force early because of health problems or job loss. Most of us likely have older friends, relatives or acquaintances who have struggled to find a job at some time since the Great Recession began. We know about unanswered applications, the scarcity of job interviews and the job offers that never came.
Even in good times, it takes older unemployed workers longer than their younger counterparts to find work, and they are more likely to drop out of the labor force, according to the BLS, with serious consequences for their long-term income security in retirement. If they do find work, earnings losses in the new job are common, according to an Urban Institute brief.
Stay Put or Move On?
The employment picture is brighter now, with unemployment rates for older workers at the end of 2015 back to where they had been at the start of the recession, according to the BLS. But it can still be tough for older workers to find employment, as evidenced by BLS tracking of continuing high long-term unemployment rates. Adding a disability or health problem to the mix doesn’t help.
For workers in long-tenure jobs—and that is still a sizable percentage of older workers (in 2014 more than a fourth of those ages 55 and older had 20 or more years with current employers, according to the BLS)—it may be easier to keep a job than to find a new one. This may be in part because workers have presumably proven their worth and also because age discrimination laws may make it more difficult to terminate older workers.
Yet many older workers would like to try something different, lessen their responsibilities, shift to part time or phase into retirement. Some employers are receptive to this, but such opportunities aren’t likely to be available across the board to older workers. The only choice, therefore, may be to move on.
So, what are the options for older jobseekers? Has the much-predicted labor shortage materialized and increased demand for older workers? If it has, it doesn’t seem to have occurred in occupations that many of us would consider especially desirable.
A recent study by Matthew Rutledge and other researchers at the Center for Retirement Research at Boston College reports that the job opportunities for older (ages 50 to 64) job changers narrow with age. This appears to be the case regardless of sex and education, but the narrowing begins earlier for the less educated.
Hiring ratios were relatively high in occupations that might not appeal to all of us—taxi drivers, crossing guards, messengers, guides, dressmakers and tailors, for instance. On the whole, these are jobs that do not require high cognitive skills. Plus, there is a financial cost: occupations with a high share of older workers pay less than those with a low share.
It is, of course, not for us to disparage these jobs. Older re-careerers have been found to move to less demanding, more flexible, less stressful and lower paying occupations and to be overwhelmingly satisfied with their new jobs, reports the AARP Public Policy Institute.
Job change at older ages may well involve trade-offs, and it is probably best to learn about them by testing the waters before retiring—it is easier to find employment while still employed.
Workers who enjoy what they are doing might be wise to stick with the job, perhaps negotiating schedule or task changes, if possible. The perfect retirement job might not be out there, unless workers create one themselves. But however people get there, the ultimate goal is a more comfortable retirement by staying in the workforce longer.
Sara E. Rix, Ph.D., recently scaled back her work hours after a 40-year career, much of it spent at the AARP Public Policy Institute, where she dealt with the problems of and prospects for older workers.
Editor’s Note: This article appears in the March/April 2016 issue of Aging Today, ASA’s bi-monthly newspaper covering issues in aging research, practice and policy. ASA members receive Aging Today as a member benefit; non-members may purchase subscriptions at our online store or Join ASA.