Working Longer Could Boost Retirement Security

Remaining in the workforce for as long as feasible benefits workers in three main ways, the Center for Retirement Research at Boston College maintains in a new issue brief, “Is Working Longer a Good Prescription for All?” It gives people a longer time frame in which to save, it increases their Social Security benefits and it shortens the number of years, and therefore the resources, they will spend in retirement.

The Center decided to examine whether it is possible for those of a lower socioeconomic status (SES), i.e. those who are less educated, to remain in the workforce, and found that they have fewer options available to them than those of a higher SES.

However, the Center also found that both men and women in a lower SES have seen their life expectancies increase by fewer years than those of a higher SES between the years 1979 and 2011. Among 65-year-old men in the lowest income quartile in 1979, their life expectancy was 77.5 years. That increased by a full four years to 81.5 in 2011. However, among the highest income quartile 65-year-old men in 1979, their life expectancy was 78.9 and that increased by 6.1 years to 85.0 by 2011.

For the lowest-income quartile 65-year-old women in 1979, their life expectancy was 82.3. By 2011, that had increased by 1.7 years to 83.7. By comparison, for the highest-income quartile 65-year-old woman in 1979, their life expectancy was 83.4, and by 2011, that had increased by 3.2 years to 86.6.

The Center says that the significance of this data is that while lower SES individuals have a harder time remaining in the workforce, their longevity has not increased as much as it has for higher SES individuals.

However, one solution that could help individuals remain in the workforce longer would be to switch to a job better suited to working longer, and this is equally true for people with no college education and those with some college education or a college degree, the Center says. The Center found that for those with no college education, the probability of remaining in the workforce to age 65 increased by 7.5%, and for those with some college education, it increased by 10.9%.

The downside to this is that by moving into a new industry, they lose their seniority and, possibly, open themselves up to job loss. And this risk could be higher for less-educated workers, the Center says. Additionally, job options become fewer for those age 50 and older, although options for older workers have increased since the late 1990s.

The Center then examined what policymakers could do to help people remain in the workforce longer, starting with lowering the cost of their health insurance, which, the Center says, is about five times the cost of insurance for younger workers. The Center says that some states have limited how much insurance companies can increase premiums by age, and some have even mandated that insurance companies do not consider age at all when setting premiums. The Center then studied whether such initiatives actually help people remain in the workforce longer and found that they do not. The only benefit was that high school graduates saw their wages increase.

The Center concludes that policymakers should find ways to help people remain in the workforce longer other than lowering their health insurance costs. The Center for Retirement Research’s brief can be downloaded here.