Will Working Longer Rescue Your Retirement?

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Two good strategies if you are short on retirement savings are pursuing work in retirement and delaying retirement. But don't bet the farm on working when you're older.

We’ve all heard about the “retirement crisis”: Most American workers aren’t saving enough money to allow them to retire.

The 2016 Retirement Confidence Survey by the Employee Benefit Research Institute and Greenwald & Associates found that, currently:

  • 26 percent of workers have less than $1,000 in savings.
  • 16 percent have saved less than $10,000.
  • 12 percent have saved between $10,000 and $25,000.
  • 10 percent have saved between $25,000 and $50,000.
  • 10 percent have saved from $50,000 to $100,000.
  • 12 percent have saved between $100,000 and $250,000.
  • 14 percent have saved $250,000 or more.

But what to do about it? The answer seems simple at first. As one headline put it: “Easy Fix for Retirement Problems: Work Longer.”

And why not? Americans are living longer, which could mean stretching out retirement to a long and potentially boring 30 years or longer. Working not only replaces the need to draw down precious savings, but it also keeps us sharp and engaged.

Older workers who face a savings shortfall are using one or two strategies to rescue their retirements:

Delay retirement: This means staying at your current job and delaying retirement until your mid-to-late 60s or longer. This lets Social Security and retirement benefits build while your wages or salary lets you hold off drawing down savings.

Collecting retirement benefits, and then returning to work: In this variation, you leave the job you have been doing and start collecting Social Security and other types of retirement pay — and then, right away or later, find another job. Work after retirement takes many forms. You might get a part-time position for an hourly wage. Or consult in your old field. Or start a small business. Or try a career in a new field that you have long dreamed of trying.

Working longer is a great solution to the retirement crisis for many. Soon, experts predict, older workers will dominate the workforce. Several reasons are given, including declining birthrates, the aging of the big baby boom generation and, yes, workers staying on the job later in life.

Here are Bureau of Labor Statistics numbers for the share of full-time workers 55 and older:

  • 1992: 11.8 percent
  • 2012: 20.9 percent
  • 2022: 25.6 percent (projected)

Almost 75 percent of people currently working who are 50 or older recently told a Merrill Lynch study that they intend to work after retiring. “[I]n the near future it will become increasingly unusual for retirees not to work,” concludes the report, “Working in Retirement: Myths and Motivations.”

Not everyone who wants to keep working after retirement age feels forced to because of financial pressure. Some are looking for new careers and challenges, want to give back to the world, want to start a business or just like working and don’t want to stop.

But money seems to be the reason for most who keep working past retirement age. Harris Poll, in a study for CareerBuilder, found that for:

78 percent, the inability to retire due to household financial situations is the clear number one reason senior workers delay retirement. The need for health insurance and benefits follows at 60 percent.

4 common roadblocks to staying on the job

Working later in life is a good plan, but it’s not always a simple one. Some older workers run into obstacles. A few of the most-common ones are:

1. Health problems: People who do physical work sometimes find as they age that their bodies no longer are up to heavy work. There’s also the toll on older people from severe illnesses like cancer and heart disease.

It’s telling that, of the 526,744 workers filing claims for federal disability insurance in December 2014:

  • 83 percent were 50 or older;
  • Workers aged 60 to 64 filed one-third of all the claims.

2. Caregiving demands: Your plans to work longer could be derailed if a family member — a spouse or elderly parent or other relative — needs care and you must stop working to provide it.

Besides generally receiving lower pay, one reason women have considerably less money in retirement than men is that they lose more working years to taking care of disabled or elderly parents or other relatives.

Looking at the cost to retirees of providing care for elderly parents alone, a 2011 MetLife study estimates that:

Women lose:

  • $142,693 in wages
  • $131,351 in Social Security payments
  • $50,000 in pension payments

Men lose:

  • $89,107 in wages
  • $144,609 in Social Security benefits
  • $50,000 in lost pension benefits

3. Lower pay: You can’t count on earning as much from a job when you are older as you previously did. When older workers (particularly women) lose their jobs and need to find new ones, for example, the new jobs tend to provide fewer hours of work, lower pay and fewer benefits, says an AARP report on work after 50, “The Long Road Back: Struggling to Find Work After Unemployment.” This means that losing a job after 55 can erode your financial security.

4. Unemployment: It’s often harder to find a job when you are older and unemployed, according to another report from the AARP. In 2015, half the people ages 45 to 70 who had been unemployed in the previous five years still hadn’t found work.

Tips for a long working life

If you are counting on a long work life to rescue your retirement, start thinking now about what you can do to ensure that you can stay on the job as long as you wish. Four suggestions:

  • Plan ahead: With jobs less certain and health issues more likely after 60, it’s crucial to have a Plan B to turn to in case life throws you a curve ball. (For help with planning, read “The Single Woman’s Path to a Happy Retirement” and “Retirement is Coming: Make These Money Moves in Your 50s.”)
  • Stay in shape: Eat healthily, quit smoking, drink moderately and exercise so your plan to keep working doesn’t succumb to health problems or disability.
  • Keep and improve your skills: For retirees who can’t find a job after spending time away from work, the number one obstacle is “skills slippage,” says a Merrill Lynch report, “Working in Retirement: Myths and Motivations.”
  • Stay current: When you retire, don’t turn your back on your field. Instead, keep communications open with key clients and business contacts. Read up on trends in your business or industry and keep asking yourself what you’d need to do if you had to find work again.

What’s your plan for retirement? What are your concerns? Share with us in the comments section below or on our Facebook page.

Stacy Johnson

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