Picture your life after 65. Do you think of soaking up the sun at a tropical resort, or clocking in at an office? Are you collecting passport stamps or paychecks? If you’re one of a growing number who plan to remain in the labor force past the traditional retirement age, it may be the latter. Today, almost 20% of Americans work past 65, and in a recent survey, a combined 39% said they either would work as long as possible or didn’t plan to retire at all. What explains this trend? Will you be (or are you) part of it? In the first of this two-part series, we’ll explore a pair of forces behind the change, plus one simple step you can take to stay in control of your post-65 destiny, whether in or out of the workforce.
Money, of course, plays a big role in the rise of working retirees. A recent report found three in five cite pay or benefits as a reason for delaying retirement. Savings shortfalls are often to blame: Around 60% of Americans aren’t building up any savings in a 401(k) or other retirement account. Now, if you’re reading this article, you probably don’t fall into this group. But even those with cash put aside may work longer: Sometimes by choice, but other times from fear.
Rising life expectancies partly explain the trend. According to the Centers for Disease Control, back in 1960, Americans’ average life expectancy at birth was the ripe old age of 70. Just over half a century later, the average has jumped to an even riper and older age of 79—an amazing leap. Average life expectancy for 65 year-olds was 79 in 1960—84 today. Of course, health, family history and lifestyle play a significant role in determining each person’s life expectancy, but broad advancements in nutrition, health choices and medical treatments lift most. This is a happy trend, but it also places a greater strain on nest eggs, leading many to keep working. Thankfully, service-driven economies like America’s place a higher premium on experience and less on physical strength, so many times, still-productive seniors can decide for themselves whether to remain on the job, rather than getting forced out. Plus, they can demand a higher salary for sticking around. One could say the glass is half-full: Working longer may be more prevalent today, but there has never been a more rewarding or easier time to do it.
This is a crucial step in retirement planning: Calculating your present and future expenses allows you to see if your retirement cash flow is out of step with spending. Too much, and you may run short; too little, and … well, this isn’t nearly so bad. Let’s focus on avoiding the really damaging scenario. Make a list of what you spend money on now, and what you’ll probably need—or want—to spend money on later. Separate necessities from luxuries, and you have a good idea of where to cut back if times get tight. You might need a couple more salaried years to get the numbers to add up—not ideal, but pretty normal. The most important thing? Seeing it coming. It’s much better to extend your time in the workforce a little while longer than it is to try and reenter years down the road. It’s less jarring, and your skills and connections are still strong. Heck, lots of people do this on purpose, absent any financial hardship. Over a third of respondents to the survey referenced above said they worked past 65 partly because they enjoyed their jobs or wanted to “stay involved.” If that’s you, great! We just want to ensure you’re making that choice because you want to, not because you have to.
Crucially, though, if you want to work past 65—perhaps even never retire—that doesn’t mean you shouldn’t save. The decision to work may not be exclusively your choice. You could be laid off. You could get injured or sick. You could have to care for loved ones. A good saving strategy can afford you the liberty to work while you are able and willing, and retire when either of those runs out.
What does a good saving strategy look like? In the second part of this series, we’ll investigate a common investment blunder that often thwarts folks’ retirement plans: fear of markets’ short-term swings.
Click here to read part two of this series.