This is a repost from Forbes.
Something’s gotta give. 10,000 people are turning 65 every day for the next few decades and a little more than half can’t afford to retire. Most of them retire anyway.
One solution: work longer and get more money! Paul Davidson of USA Today detailed cheerful profiles of older people who fired themselves from retirement and came back to work, commanding their employers to adjust their work schedules. I don’t blame Paul for the hopeful solution to the retirement crisis, but the numbers don’t support the hope. In the same week as Paul’s article, Actuary Elizabeth Bauer, a fellow Forbes contributor, cautioned many may not be healthy enough to work longer.
I estimate that of the 12 million men between the ages of 65 and 70, 4.7 million have retired but can’t support a lifestyle anywhere near what they achieved while working. Maybe they have a spouse who can support them. Maybe they became hippies and live off the grid. But they probably eat less and do less. Medical research finds that financial stress causes health to get worse, so they likely will die sooner than if they had maintained their economic status.
My research team at The New School’s Retirement Equity Lab (ReLab) estimates about 2.7 million men continue working because they can’t afford to retire. Since they are less likely to be college educated, their pay is likely to be low. Even with the recent red-hot economy and tight labor markets, wages for workers over 55 are practically frozen. The average weekly wage for full-time older workers has slowed, declining from $936 in 2016 to $811 this year.
I am worried about older Americans seeking work to avoid financial hardship in old age. The ones who need to work because of inadequate pensions and retirement wealth are more likely to have less education and be less desirable for employers. Prudential Insurance research cautions, sadly, that employees who stay past their time may be too expensive, especially when comparing the benefits of hiring a younger worker.
If we keep believing that more work will solve the retirement crisis, we are doomed to be global standouts among the community of rich nations. If we do nothing, the future of this country is high rates of both old people working and old-age poverty. The United States is one of few nations to have more than 30% of their older people working.
Even though people might think that working longer is the solution to old-age poverty, working longer could be a cause! How does that work? The hope of working longer creates a comfortable fantasy that lets us all off the hook to do something, like create a workable national pension system. A Reagan administration officer was prophetic. He saw the link between old-age work and poverty. Reagan’s Deputy Labor Secretary Malcolm Lovell told Congress in the 1980s that older Americans will need to work because Social Security was slowly being cut and employers were eroding their workplace pension plans.
I worry that we will cling to the idea that if people don’t have enough retirement income, they can just work. That hope – lifted up by the cheerful USA Today article and thousands like it – does nothing to help people save for retirement. On the other hand, a new book called Rescuing Retirement outlines steps we can take to help us all accumulate retirement savings.
Ever since the 1980s, Americans have been expected to save, work, or make do. This won’t do anymore. If we do nothing, millions more older Americans will be stranded.
Andrew Minster assisted with this blog.