For decades, American workers have treated retirement—the end of the “daily grind” of working for pay—as an important part of the American life cycle. But whether they’ve planned to or not, not everyone retires.
Have you ever wondered why some people don’t retire? The answer is linked to transformations in the economy, demography, and society that have occurred since the concept of retirement was first introduced in the United States.
When Did Retirement Start?
To understand why some people never retire, we need to understand what is “retirement.” The idea of a period of non-working “rest” at the end of life dates back to 1880s Germany (then Prussia). President Otto von Bismarck introduced a government-funded old-age pension for Prussian citizens aged 70 and older.
Bismarck’s idea was rather new. Before it, there was no agreement that your “working life” could come to an end while you were still alive. As long as you were living, you were expected to work! Thanks to Bismarck, the idea of a period of “non-work” following many years of work caught on around the world. The United States introduced Social Security in 1935 to help workers leave the paid workforce at age 65.
Over the next decades, the idea of retirement grew in popularity. Employer-sponsored defined-benefit pension plans were added to benefits packages for some Americans, as well as other employer-sponsored retirement savings plans, such as 401(k)s.
Why Do Some People Never Retire?
The reasons people may continue to work after the “traditional” retirement age of 65 may vary . They include:
- A financial need to continue working or build up a cushion for later years.
- The desire to stay active and engaged in the work force.
- The removal of barriers that might once have prevented working past age 65.
- The itch to explore new kinds of work.
Whatever the reasons, the reality is that more and more people are working after the age of 65 and the idea of a career “off switch” may become unusual.
Let’s take a deeper look at the reasons some people never leave the world of work.
Retirement Is No Longer Expected
As time passed, the idea of retirement did not remain static. Instead, it continued to transform as the economy and society changed and grew. Despite the fact that the idea of retirement is enshrined in programs such as Social Security and the number of people over the age of 65 has increased dramatically, not all Americans over retirement age have stopped working.
In fact, the number of post-65 workers is on an upswing. By 2018, about 16 percent of women and more than 20 percent of men 65 and older were in the labor force, and these levels are projected to rise to 18 percent for women and 26 percent for men by 2026.
Retirement Can Last As Long As Your Working Life
When Social Security was introduced in 1935, life expectancy at age 65 was about 13 more years. That number has increased to about 18 years for men and over 20 years for women. Those numbers are averages, that means that half of people who reach the age of 65 are expected to live beyond those additional two decades.
What does that mean for retirement? A working career might last 25, 30, or 35 years; the new reality is that retirement can last as long—or even longer.
This observation is particularly relevant to women, who may start working later than men or take time away from paid work to raise children or care for other family members. Women in these categories tend to have fewer years of employment and less time to build up Social Security credits and other retirement savings. This is especially worrisome given that women, on average, live longer than men.
What is Longevity Risk?
For those concerned about the possibility of living a very long time after they retire—known as “longevity risk,” or the risk that you will outlive your money—one solution is to spend additional years in the workforce.
The mathematics of moving one year of life from the “non-working” side of the ledger to the “working” side are simple: Every year that you continue to work reduces the number of years for which your retirement nest egg has to sustain you. The length of time spent in retirement is uncertain, continuing to work—generating income and postponing withdrawals from your retirement nest egg—provides more certainty to your retirement finances. For people who are “longevity-risk-averse,” this simple solution can be very appealing—and can lead them to a “never-retire” plan.
There’s Growing Room for Post-65 Workers in Today’s Economy
With longer lifespans, an increase in the number of people over the age of 65, and a declining approach to retirement as an “off switch” for working life, it isn’t surprising that the economy continues to make room for people who want to work beyond that age. Employers may seek out “older” workers who feel that there’s no expiration date on their skills and talents.
The Encore Career
In recent decades, a new wave of working-after-65 attitudes and practices have emerged across the country. This includes people remaining in their careers after reaching the conventional retirement age, starting second careers, or encore careers, in their 50s, or opening businesses and pursuing self-employment after decades spent in more traditional work settings.
The “post-retirement” career can often provide many of the features workers prize:
- Smaller commitment of time and energy
- Work experience that more closely matches individual preferences
- A way to reduce financial risk in later years by continuing to generate income
This would also allow other sources of retirement income, such as Social Security or private retirement savings, to remain untouched for a few years.
Of course, not every older worker remains in the workforce by choice, and some observers have pointed to this growing trend as a troubling indicator of declining income and rising cost of living.
Making the Decision
If you’re approaching the “traditional” age of retirement and contemplating whether you’re going to remain working, what are the issues you need to consider?
Should You Stay or Should You Go?
First, of course, decide whether you would like to continue working and earning income. If the answer is yes, figure out whether you’d like to stay in your current work situation or explore something new.
Your overall health should impact your decision, including your assessment of how your health may change in coming years. Also consider how long you might live, which you might be able to gauge by reviewing how long your family members lived.
If there are costs associated with continuing to work that would otherwise decline (e.g., buying prepared lunches and maintaining a work wardrobe), make sure you’ve factored them into your plan.
If you’re married, coordinate with your spouse, whether it’s so you can both remain in the workforce until a planned date, or you can harmonize your overall financial and estate plans. Other family members may also have expectations about how you’re going to spend your post-65 years, so you may want to touch base with them as well.
Sources of Retirement Funds
If you’re eligible for Social Security or an employer-sponsored workplace pension, or you have a private retirement savings account, make sure you understand what your options are for taking or deferring income from those sources, and the implications for each option. If you are married and there are multiple potential sources of retirement income for you to draw from, the task of optimizing income from all these sources may be complex, requiring careful consideration.
Finally, you’ll probably want to think about how you want the rest of your life to look and how you’re going to address financial challenges, such as unexpected health care costs, that could arise.
All in all, a plan to work after the age of 65—a “never-retire” retirement plan—can provide a source of continued income and fulfillment. Choosing not to retire provides the chance to remain in a work setting that is personally rewarding, explore something new, and help strengthen your financial position for the coming years.
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Thank you to Rosemary and Landroll for the inspiring notes below. Working makes us feel alive and active as well!
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