January 11, 2011
Ask certified public accountant Milton Resnick whether he's ready to retire, and you get a snappy answer: "I play tennis on Sundays and Wednesdays; maybe I can play golf three days a week. Now I've accounted for 28 hours a week, what do I do with the rest of my time?"
At age 73, Resnick continues to serve clients at his own firm in Millburn, N.J., answering tax questions, helping with mortgages or equipment lease financing, preparing financial statements and completing tax returns. His one concession to being 11 years older than the typical new retiree is to leave the office no later than 6:30 p.m. — although he still works seven-day weeks during tax season.
"I enjoy work. It’s challenging," he said. "It gives me purpose."
Resnick is one of a growing number of Americans who are delaying the age of retirement, as they live longer and healthier lives. Policy makers view this phenomenon as cause for celebration, because they say it is critical to solving the long-term U.S. fiscal crisis as more and more Americans reach the eligibility age for Medicare and Social Security.
Over the past 16 years, labor force participation rates for men aged 62 to 74 climbed 39 percent, reversing three decades of decline. At the same time, participation for older women jumped 66 percent. In 2010, the government reported the highest number of 60-somethings in the work force since age-specific records began in 1948 — 12.9 million.
"Many people are living healthy, long lives and they want to do something productive during that time," said Betsey Stevenson, chief economist for the U.S. Labor Department, in an interview with The Fiscal Times. "We do see and expect to continue to see rising labor force participation in people in their 60s. Even the recession has not reversed this trend."
When workers delay taking Social Security benefits and contribute to the country's economic growth longer, they both lessen the burden on the federal government and add to U.S. gross domestic product. The U.S. government spent $706 billion on Social Security in fiscal 2010, one-fifth of the federal budget and 4.8 percent of GDP. The program is projected to grow to 6.2 percent of GDP by 2034, with tax revenue covering only 80 percent of the cost, according to the Congressional Budget Office.
“The pathway out of the labor force has gotten much more complex.”
The challenge for policy makers is to create incentives for healthy, active people to keep working, while protecting those who physically can't stay in the labor force. Currently, seniors may begin collecting Social Security at age 62, through early retirement, but may increase their payout for every year they wait to claim maximum benefits, up to age 70.
The President’s bipartisan fiscal commission last month recommended gradually increasing early and full retirement ages, to accommodate increases in life expectancy. After the normal retirement age reaches 67 in 2027 under current law, the commission proposed indexing both retirement ages, so that they would climb about one month every two years. The recommendation is projected to close roughly 18 percent of the projected Social Security shortfall over the next 75 years.
Critics of the plan say the changes would hurt the poorest, sickest workers who are less able to work longer and face a 100-plus day backlog for disability claims to be processed. A Government Accountability Office report this fall questioned whether such a move would even save money, if it led to increased disability claims.
Moreover, even those 60-somethings who are able and eager to continue to work may be unwilling or unable to shoulder the same full-time load as earlier in their careers. A broader array of flexible work arrangements — which employers are beginning to offer to retain experienced employees — would help delay retirement and keep older people in the work force longer, even on a part-time basis, experts said.
An AARP survey found that 69 percent of older workers plan to stay on the job into their golden years, but the majority would prefer part-time options. The top two reasons for wanting to keep working were for money and health insurance. The people who are already working past traditional retirement age tend to hold jobs that are structured differently: more flexible, fewer hours, less office politics and higher satisfaction, according to research by the Families and Work Institute.
"One of the big changes over the last 30 years is that the pathway out of the labor force has gotten much more complex. People used to go from full-time work to full-time retirement," said Richard W. Johnson, senior fellow at the Urban Institute. "More and more people are slowly transitioning out of the labor force. Part-time work has become much more common for people in their 50s and 60s than it used to be. There's this real desire for part-time work at older ages."
The financial crisis and recession have motivated some workers to delay retirement, as they struggle to recoup losses in their nest eggs. Even a two-year increase in the median retirement age could cut in half the share of households that are financially unprepared for old age, according to a McKinsey Global Institute study. Rather than seeing these people as crowding out younger workers from jobs, it's important to remember that as they stay in the work force longer, they generate more demand for goods and services — which creates jobs, Stevenson said.
"The fact that people are healthier and living longer allows them to work longer, generate more retirement savings and live better once they do retire. Those trends are positive," Johnson said. "What's also driving the increase in average retirement age is growing insecurity about retirement incomes … and health care overall being more expensive."
“If a woman wants reduced hours, she has to quit her good
job and take a rotten part-time hourly job … The same is
largely true of employers with an aging work force.”
People who are at full retirement age (65 to 67, depending on when they were born) can earn as much outside income as they want and not be penalized. However, people who put in for Social Security before reaching full retirement age who continue to work can earn no more than $14,160 a year before incurring penalties on their benefits — a loss of $1 for every $2 earned in a job above $14,160 a year. For many of those people with relatively good-paying jobs, it makes sense to postpone claiming Social Security benefits.
Older workers who are laid off have a tougher time finding another position. In November, unemployed people older than 55 experienced an average 45 weeks of unemployment. Thus far, few employers have shown an eagerness to expand flexible options or persuade older workers to remain employed, said Eileen Appelbaum, a senior economist at the Center for Economic and Policy Research.
"We had that same feeling when women joined the work force, that there would be an incentive for employers to produce high-quality, reduced-hour jobs, but if a woman wants reduced hours, she has to quit her good job and take a rotten part-time hourly job," Appelbaum said. "The same is largely true of employers with an aging work force."
Older workers who stay in the labor force past retirement age generally aren’t competing for the same jobs as recent college graduates, because of the difference in their levels of experience and competence. College grads are mostly seeking entry-level positions while seniors remaining in the work force frequently have a much greater skill set. Essentially, they are at opposite ends of the job market.
Many employers mistakenly view older workers as too costly in salary and health insurance, and likely to be short-timers, said Deborah Russell, director of work force issues at AARP. In fact, older individuals are three times as likely to stay with the same employer as a younger person, and often want to work well into their 70s, according to AARP research.
"In certain industries and sectors, employers are going to need to look at older workers as a viable component of their talent pool as they're looking to recruit workers into those jobs," Russell said. In 2010, AARP ran 38 career fairs across 19 states to help out-of-work older workers retool their resumes, learn how to job hunt in the digital age and rebuild their self-confidence.
Take the health care sector, where a shortage of nurses has forced employers to focus on retaining older workers, and to view flexibility as a strategic business tool rather than an accommodation, said Ellen Galinsky, president of the Families and Work Institute. Bon Secours, for instance, offers more flexible and part-time work in addition to facilitating transitions to less-physically demanding jobs. The company child care center is available to grandchildren of employees, not simply children. "They've done a lot of things to make the work force more appealing to older workers," Galinsky said.
The utility industry's engineers, executives and field technicians have an average age of 48, five years older than the median U.S. worker. At PSE&G in Newark, about a third of the energy company's 10,000 employees are already eligible to retire, said David Lyons, a PSE&G director. To keep skilled workers, the company implemented a phased retirement program three years ago that lets eligible employees work up to 24 hours a week for two years while receiving pension benefits, in addition to a program to rehire retirees for temporary engagements of up to 24 months.
"It helps our company out. It helps employees transition and train somebody who's coming in to take over their work," Lyons said. "No matter how smart a college engineer is, you can't pour 20 years of experience into their head."
The Graying Work Force (The New York Times)
34 Ways to Solve our Fiscal Crisis (The Fiscal Times)
Global Aging (Bloomberg Businessweek)