Continuing to Work without a Retirement Plan, No Plan at All

Cleo Parker had a simple plan before retiring: She would work well into her 60s as a marketing analyst in the automotive business. But recently, she has been searching for a Plan B.

The problem with having no set date to wrap up your working life, is that things don’t always go as planned. For Ms. Parker, a long-time job with an ad agency ended when she turned 50. She worked a series of short-term contract and full-time positions for a decade, and her last full-time job ended in 2018. The problem, according to the article “Why Working Till Whenever Is a Risky Retirement Strategy” from The New York Times, comes when workers run up against age discrimination, being overqualified for many jobs and having to convince employers that you are really, truly, okay with being paid far less than you were paid in your prior career.

In other words, it’s fine to plan to postpone retirement and keep working. However, you also need a backup plan, if things don’t go the way you planned.

Today’s older American understands that working longer is a better way to secure his or her retirement. A study from the Employee Benefit Research Institute found that 33% of workers expect to retire between the ages of 65 and 69, and 34% plan to retire at age 70, or beyond, or never.

Another study, from the Center for Retirement Research at Boston College, found that 37% of workers retired earlier than planned, and that the odds of their success fell as the goal became more ambitious. Of the 21% who planned to work to age 66 or later, 55% failed to reach that target date.

The most common causes of early retirement are not choice, but health problems and job losses. Other reasons may be age discrimination, which makes it difficult for older workers to get new jobs. The quality of work matters too. Being motivated to work and feeling that you are accomplishing something matters as much to the older worker, as it does to the younger worker.

Labor-force participation rates for workers 62 and older have been on the rise for the last 25 years, but those increases are mostly among better educated workers. College grads tend to be healthier, don’t work at physically demanding jobs, and are valued by their employers.

Working longer has another benefit: it allows you to delay Social Security claims, which increases monthly benefits. It also can mean more years of saving for retirement and fewer years of being dependent upon retirement savings.

However, even in a healthy employment market, counting solely on working until “whenever” to make a retirement plan work is a risky strategy. For the older worker, the chances of a full economic recovery to prior salary levels are not great. Early retirement, when it’s not by choice, can also lead to significant drains on retirement funds.

The most popular ages to retire — 62 and 65 — are tied to the first year of eligibility for Social Security (62) and Medicare (65). But neither of those ages maximizes an individual’s Social Security benefit.

Reference: The New York Times (May 16, 2019) “Why Working Till Whenever Is a Risky Retirement Strategy”

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