More Americans than ever say they’ll work in retirement but not necessarily by choice.
In a post-Covid world, Americans have altered their lifestyles, their careers, and their futures.
One byproduct of that generational realignment is the willingness, or need, to keep working in retirement. Increasingly, more Americas closing in on retirement expect to work during their “Golden Years”.
According to Allianz Life Insurance Company of North America’s 2022 Retirement Risk Readiness Study, 59% of near-retirees say they are planning to work past the current Social Security retirement age; yet only 11% of current retirees actually did so.
A Life of Purpose – and Distrust of Social Security
Is the rising trend of working in retirement, especially full-time work, driven by need or want?
Financial experts say it’s a combination of both, with a dash of altered realities tossed into the mix.
“Baby Boomers, currently aged 58 to 76, know they’re catching a tidal wave of breakthrough medicine, science, fitness, and wellness products and services that are about to increase life expectancy not just gradually but dramatically, and to an unknown age,” said Chuck Underwood, owner at The Generational Imperative in Miamisburg, Ohio. “And it’s simple – if you don’t know how long you might live, how can you ever say you have enough money to retire?”
Additionally, baby boomers increasingly believe Social Security might go insolvent in another decade, thus making work a necessity. “With Americans’ distrust and disgust with Washington D.C. pols, they don’t know if that safety net might evaporate,” Underwood said.
The Social Security trust funds are currently expected to be depleted between 2032 and 2034. If — or most likely — when that happens, “incoming tax revenue would be sufficient to pay only about 78% of scheduled benefits,” according to the Congressional Research Service.
Work Ethic is Key to Retirement Planning
A lifelong, ingrained work ethic also factors into the “work during retirement” trend.
“From their childhood, Baby Boomers have been the “Working Generation” and, at the same time, the “Make The World Better Generation.” Underwood added. “Those two core values mean Boomers want to awaken each day with some meaningful purpose.”
Baby Boomers also saw their own fathers and mothers retire as soon as they could from what often was manual labor, physically-demanding careers during America’s great manufacturing years.
“To those parents, retirement was viewed as a reward that prior generations had never gotten to enjoy,” Underwood said. “But Boomers’ moms and dads retired, lost their sense of purpose, grew old too rapidly, and died. And so, to many boomers, full retirement is a glide-path to death.”
Apparently, American companies are okay with older Americans remaining in the workforce. As usual, the numbers tell the story. “The generation right behind the Boomers, Gen X, is uncommonly small at 58-million, compared to Boomers’ 80-million,” Underwood said. “The American workplace needs to retain Boomers.”
In addition, “smart employers are undergoing the management training to understand generation-specific workforce strategies and provide aging employees with working conditions and perks that will keep them under the roof.”
Facing Money Reality Matters
Money matters, too – especially the lack of it later in life.
If a career professional gets to retirement age and hasn’t accumulated enough retirement savings, that person only has two options left — continue working or accept a lower standard of living in retirement.
“Neither of them are good options,” said Robert R. Johnson, professor of finance, Heider College of Business, at Creighton University. “There’s a misconception among many Americans that Social Security will provide for their retirement. Plus, they’re in denial about the standard of living that relying on Social Security will provide them.”
Social Security typically replaces less than 40% of a retiree’s average income. More than 90% of beneficiaries receive less than $2,500 a month, according to the Center on Budget and Policy Priorities.
Yet the pending demise of Social Security is greatly exaggerated, Johnson said.
“Besides being political suicide, the elimination of Social Security is not consistent with the value system of the United States,” he noted. “Many other government-funded programs would be eliminated or cut back before Social Security.”
However, “we are in an incredibly polarized political environment right now and it appears that many of the foundational principles that we have come to embrace are under question.”
Consequently, seniors are increasingly having to work in retirement by force, because of the uncertain economy, not having enough savings, and because of post-pandemic lifestyle issues.
“Actually, I believe it is a combination of all those factors,” Johnson said.