Financial Planning, Retirement

Delaying Retirement Is Not Always An Option

2/21/18 8:00 AM

iStock-458866939.jpgThe Stanford Center on Longevity (SCL) estimated that by 2050 more than one in five (21 percent) Americans will be at least 65 years of age. That is nearly double the ratio from 2010 and almost three times what was seen during the 1950s. Americans of this age traditionally would be retired but a growing number of people are continuing to work well past the age of 65. In fact, projections using Bureau of Labor Statistics (BLS) data suggest that nearly a quarter (23 percent) of all Americans ages 70-74, and 14 percent of adults ages 75-79, will still be a part of the U.S. civilian labor force in 2024, roughly double the proportions seen in 1994 (see below).

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Such estimates are supported by a recent study from the Transamerica Center for Retirement Studies, which found that more than half (53 percent) of surveyed U.S. adults plan to work past the traditional retirement age of 65, including 13 percent that do not expect to ever retire. For some Americans, continuing to work after the age of 65 will be because they are passionate about their profession or simply have a desire to stay active, e.g. many respondents said that during retirement they plan to “pursue an encore career” (13 percent), “start a business” (13 percent), and/or “continue to work in the same field” (11 percent). For other Americans, though, continuing to work in old-age will be a necessity because they must earn a few more years of income to make up for inadequate retirement savings. That is not a bad idea considering that an analysis by the Urban Institute estimated that working for just five more years could result in as much as a 56 percent increase in retirement income based on the incremental net wealth accumulated.

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However, it may be dangerous to assume that delaying retirement and continuing to work will always be an option. A new report from Prudential, for instance, found that of the 51 percent of surveyed retirees that retired earlier than planned, only 23 percent did so by choice. Forty-six percent of those who retired earlier than anticipated instead did so due to health problems, 30 percent were laid off from their jobs or offered an early retirement incentive package, and 11 percent left work to take care of a loved one. Moreover, half of those who retired earlier than planned stopped working five or more years ahead of time. The report’s authors added that “This is especially important because the last several years of individuals’ careers are generally considered to be among their top earning years,” and “the potential loss of employer-sponsored health insurance, coupled with an increase in out-of-pocket expenses for individuals retiring for health reasons, may further strain financial resources.”

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Sources: SCL, TCRS, The Urban Institute, Prudential

Post author: Charles Couch