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Working During Retirement Years Can Prove Beneficial to All
March 5, 2008 | 1 comment
(THE ECONOMIST M. Ray Perryman) -- The idea of working until you retire seems to be undergoing a metamorphosis with the idea now being forged of working past retirement, or at least past the age of 65, which Americans have usually considered the beginning of their golden years when they would no longer have to face the 9-to-5 routine.
That’s the word from a large percentage of the baby boomer generation who are entering the time when Social Security checks traditionally begin to appear in their mail boxes. As each year passes, the number of people who turn age 65 and remain on the job continues to climb.
The reasons are fairly evident as to why older persons are choosing to supplement their main sources of income--personal savings, pensions, and Social Security--with ongoing employment. Among them are (1) the increasing lifespan, which is requiring more money to cover the “extra” years; (2) rising health care costs; and (3) declining health care coverage.
In addition, older citizens are improving in health and, therefore, they are more able to work. A corollary to that reality is the fact that there has been a steady decline in the number of jobs that require strenuous physical demands from 20% of all jobs in 1950 to 7% in 1996 and probably even less today.
With concerns about the slowing US economy, odds are that in the days ahead, even more “senior citizens” will be opting to remain at their jobs a bit longer or at least take advantage of the opportunities they might have to continue receiving paychecks in different fields of endeavor, either full time or part time. While money is not the only reason people choose to work past retirement, it is certainly the driving force for many.
Individuals who delay retirement will, of course, earn extra money and build up additional Social Security benefits. They also may be able to accumulate more in employer-sponsored pensions. The Urban Institute suggests that delaying retirement by five years could increase annual retirement spending by 56%.
In addition to the benefits of continued income, many of these workers remain on the job for personal reasons. Many men and women define their lives with their jobs. For such individuals, quitting work is like removing a part of themselves. Continuing on the job also promotes social integration and social support. Moreover, staying active can enhance physical health and emotional well being. Several recent studies show that 97% of those who are 70 years of age and older really enjoy what they are doing in the workplace.
Keeping people in the workforce longer is also good for the US economy. The US population is living longer, and couples are having fewer children. There are over 36.8 million Americans 65 years of age or older, an increase of 5% (from 12% to 17%) in the past half century. According to the Census Bureau, the percentage of seniors in our nation by 2050 will likely be around 27%. Tapping this source of labor will facilitate future economic growth. As of January 1, 2008, the first of the baby boomers became 62 and, thus, eligible for Social Security benefits.
The number of people over age 70 has been edging up during the past decade or so. In 2007, the percentage of men 70 years old and older who were employed was 14%; for women it was less than 8%. Currently, there are approximately 2.7 million Americans still going to work every day who are in their 70s, 80s, and even 90s.
An influx of older people would certainly ease the labor shortage in many critical fields, especially those requiring higher education. The older population could expand the inventory for the additional workforce needed in the US for the future. By 2020, it is estimated that 60% of adults under age 75 will be composed of individuals ages 55 to 74. If everyone continued working five years beyond the normal retirement age, the extra Social Security taxes would prove greatly beneficial in reducing the anticipated Social Security fund shortfall over the next 35-40 years.
But not everything is positive with regard to this age group. Many employers believe that seniors tend to be less creative and not as willing to take the initiative and learn new ways to do things. Some employers are unwilling to train older workers because the cost ratio compared to the years of expected labor is too high.
Moreover, for those jobs that do require greater physical strength, the older folks do not fair as well as those younger. Additionally, health insurance plans often cost more for employers as workers age, and, in many cases, those who have seniority on the job frequently require higher salaries.
Still, most employers value the loyalty, work ethic, and reliability of older workers. Many even view older white-collar workers as more productive because of their experience, sometimes sufficient to offset health-related costs and higher salaries.
It’s up to the seniors, of course, to convince businesses that they are still capable of contributing well past the traditional retirement age (although increasingly the convincing is going the other way). As more seniors shun or delay retirement, we can expect the benefits to the individuals and companies, as well as the economy as a whole, to continue to expand.
Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.
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