For many workers, the “new retirement” is no retirement
Back when baby boomers were young—and sex, drugs, and rock ‘n’ roll were at their height—many commentators questioned what this feckless generation of do-nothings boded for the future of the country. Who was going to run the government, engage in commerce, teach the young, provide services? Who was going to do all the work?
Wouldn’t those commentators be surprised. Because the boomers now hitting retirement age are hanging onto their jobs like pit bulls, and sometimes forgetting to retire altogether. In fact, it would be easy to conclude that boomers—people born between 1946 and 1964—are a bunch of workaholics.
The reality is more complicated than that. But there’s no question the average retirement age of American workers is rising, and not just among boomers. Close to 24 percent of men aged 70-74 still work, up about seven percent from 10 years ago, and one-in-three men aged 65-69 are still on the job, according to recent data from the Thomson/Reuters University of Michigan Surveys of Consumers. Women are staying in their jobs longer, as well. More than 14 percent of women aged 70-74 are still employed, an increase of about three percent in the last decade, and one-in-four women aged 65-69 currently work, up almost six percent.
Substantial numbers of more senior Americans—those 75 or older—also are working: one-in-10 men and one-in-20 women. “For most of the 20th century we saw retirement ages fall while life expectancy rose,” says David Weir, a research professor at the Institute for Social Research (ISR) and director of the Health and Retirement Study. “About 20 years ago, the trend in retirement age reversed, and it has been inching up slowly ever since.”
Money for the golden years
People are retiring later for a lot of reasons, but a key one is economic. Employer health insurance benefits for retirees are eroding, spurring many employees to hold out until they qualify for Medicare at age 65. Changes to Social Security, such as the increase in the age at which people can receive full benefits from 65 to 67, also may be playing a role. And people are living longer, requiring additional savings to support those extra years.
How people amass those retirement savings has also undergone a sea change. Employer-provided defined benefit pensions, which typically were structured to provide maximum benefits at or before normal retirement age, are mostly a thing of the past now, making early retirement less affordable. Their replacements, defined contribution plans, accrue until an employee leaves and don’t penalize late retirement. They also require employees to manage their own accounts, which can expose savers to financial risk.
Indeed, many retirement and savings plans took a severe hit during the recent economic downturn, a hit that was particularly devastating for those nearing or already in retirement. Some 40 percent of older Americans delayed retirement in the years after the Great Recession, according to an analysis of data from ISR’s Health and Retirement Study and its Cognitive Economics Study.
“The typical household lost about five percent of its total wealth between the summers of 2008 and 2009,” says ISR economist Brooke Helppie McFall. People don’t intend to work long enough to recoup all the money they lost, McFall says, but on average, those who postponed retirement expect to work about 1.6 years longer than planned.
And even as the economy has begun to turn around, many households still find themselves facing a more precarious future. “While the stock market has recovered most of its pre-recession value, housing prices have not, and for most people their house is their biggest asset,” says ISR’s David Weir.
Loving the job
Of course, economic motivations are just part of the older worker phenomenon. Many married men are likely to stay on the job longer now because their wives are working. Couples typically want to coordinate their retirements, and if a wife is working until age 62 or 65, that’s an incentive for her often slightly older husband to keep working, too. And some people aren’t retiring for a simpler reason: they love their jobs.
Not surprisingly, working beyond normal retirement age by choice is particularly common among the wealthier and more highly educated, those who are likely to have better health and jobs they can still do effectively at an advanced age. (Workers in low-paying and physically demanding jobs often are ready to retire as soon as finances allow.) Overall, many more jobs than before rely on cognitive skills, rather than physical abilities, studies show, and the number of retirement-age employees who are physically able to do work into later years has increased, as well.
Finally, fear of change and the unknown may keep some people at their desks. Karen Semenuk and Lorna Hurl run retirement workshops and meet with individual employees as part of U-M’s Faculty and Staff Assistance Program. They deal not with the economic repercussions of pending retirement, but with the emotional ones. “People who are very identified with either their profession or their work wonder what happens when that’s no longer how they define themselves,” Semenuk says. “How do I define myself?”
A gradual fade
Although people are working longer, most still decide to retire at some point. But even that process has changed. According to an analysis of Health and Retirement Study participants born between 1942 and 1947 that appeared in the January 2009 edition of Research on Aging, nearly two-thirds of those who retired from full-time work passed through some sort of bridge job—either part time or of short duration—before leaving the work force entirely.
“Our findings further reinforce the notion that for many older Americans, retirement is a process, not a single event,” wrote the authors of Bridge Jobs: A Comparison Across Cohorts. “Only a minority of older Americans now retire all at once, with a onetime, permanent exit from the labor force.”
Working part time may seem an obvious bridge step. More surprising is the move to different full-time work after retirement. Nicole Maestas, a RAND economist and researcher with U-M’s Michigan Retirement Research Council, says the number of people who retire, take a break for a couple of years, and then return to work has been increasing since the early 1990s; some 40 percent of workers between the ages of 51 and 61 who stop work will return in some full-time capacity, according to her analysis of data from the Health and Retirement Study. Maestas, who has coined the term “unretirement” for this phenomenon, at first expected to find that the main factor pushing such returns would be unexpected financial hardships. Instead, she found the trend most pronounced among better-off, more educated workers who had stated their intentions to return to work prior to retirement, and who often chose to switch industries or occupations.
“People don’t want to stop working, but they don’t necessarily want to keep doing the same thing they’ve done.” Maestas says. And having access to pension funds or Social Security payments or both makes such a change much more feasible. “It’s like a chance to do the thing you’ve always wanted to do,” she says. “You’ve got this new freedom to take a break without that social stigma and to try something new in a safe way.” (Maestas notes that her data preceded the Great Recession; a larger percentage of people may now be returning to work who fit her original financial hardship assumption.)
Dollars and sense
So is there an economic downside to the number of older workers still on the job? Yes and no. U-M and many other universities generally offer a finite number of jobs: If older faculty and staff aren’t leaving, there are fewer opportunities to bring in new blood. But ISR’s David Weir is quick to point out that universities shouldn’t be seen as a microcosm of the country overall. The national economy can create new jobs and new ways for people to participate in the workforce. “The kinds of policies that seek to force older people out to create jobs for others don’t end up creating any more jobs,” Weir says.
And the positives of later retirement for society and individuals—including easing potential labor shortages, producing more goods and services, funding Social Security and Medicare, postponing claims on those public funds, and shoring up personal assets for a more financially stable future—speak for themselves.
Besides, those who aren’t able to retire as early as they wanted can comfort themselves with this: A recent study drawing on data from the Health and Retirement Study and its international sister studies suggests that working longer may help to preserve memory and other cognitive abilities, even when the work itself isn’t mentally stimulating.
“There is evidence that social skills and personality skills—getting up in the morning, dealing with people, knowing the value of being prompt and trustworthy—are also important,” Robert Willis, a U-M professor of economics, ISR researcher, and one of the authors of the study recently told The New York Times. “They go hand in hand with the work environment.”