Balancing the Need and Desire to Work Past Retirement Age

Northwestern Mutual’s 2019 Planning & Progress Study found that 46% of Americans expect to work past the traditional retirement age of 65.

Nearly one out of five Baby Boomers (18%) and an equal percentage of Generation X (18%) expect to work even longer—past the age of 74.

More than half (53%) of Americans who expect to work past age 65 say it will be by choice, compared to 47% who say it will be out of necessity.

Among those who say they expect to work past age 65 out of necessity, the top three reasons why include:

• “I won’t have enough saved to retire comfortably” (78%);
• “I do not feel like Social Security will take care of my needs” (56%); and
• “I am concerned about rising costs like health care” (49%).

For those expecting to work past 65 by choice, the top three reasons why include:

• “I enjoy my job/career and would like to continue” (58%);
• “I want additional disposable income” (46%); and
• “It is a social outlet that will help me stay active/prevent boredom” (39%).

According to the study, more than one-fifth (22%) of Americans have less than $5,000 saved for retirement. “Given what we know about savings levels, the number of people who can afford to retire at 65 is low,” says Emily Holbrook, senior director of planning at Northwestern Mutual. “At the same time, people across the country are changing what the face of retirement looks like and getting satisfaction well beyond their bank accounts by continuing to work. The combination of those factors—affordability and lifestyle—form the bedrock of a good financial plan.”

However, studies have shown that employees’ plans to work later in retirement do not always pan out. According to the Employee Benefit Research Institute’s (EBRI’s) 2018 Retirement Confidence Survey, the median age at which people expect to retire is 65, but the actual age is 62. The reasons why are usually because of a health problem, a disability or being laid off.

Seventy-nine percent of workers want or expect to work in retirement, said Lisa Greenwald, executive vice president with Greenwald & Associates, but only 33% of retirees have worked for pay since retiring. Twenty-one percent of workers expect that working in retirement will provide them with a major source of income, but this is only true for 9% of retirees, she added.

Employers have reasons to want employees to retire on time—older workers are often paid higher salaries than newer workers, can increase employers’ health care costs and can prevent hiring and advancement opportunities for younger workers. However, a survey of 2,043 retirees by the Transamerica Center for Retirement Studies (TCRS) shows two-thirds (66%) say their most recent employers did “nothing” to help pre-retirees transition into retirement, and 16% are “not sure” what their employers did.

Among the 18% of retirees whose employers helped pre-retirees, the most frequently cited offerings are financial counseling about retirement (6%), seminars and education about transitioning into retirement (5%), the ability to reduce work hours and shift from full- to part-time (5%), and accommodating flexible work schedules and arrangements (5%).

The U.S. Chamber of Commerce has tried to promote the idea of a phased retirement, Aliya Wong, executive director of retirement policy at EBRI said.