Many Americans plan to work longer to close their retirement savings gap. But it could be a pipe dream.
According to a new survey by the nonprofit Transamerica Center for Retirement Studies (TCRS), 55% of workers plan to work after they retire. This includes nearly 20% planning to work full-time and more than a third planning to slog part-time. Even more eye-opening, a staggering 15% of all workers believe their primary source of income for retirement will be work.
TCRS, in partnership with the Transamerica Institute, surveyed 5,725 workers ages 18 and older who worked at a for-profit company that had one or more employees between November 8 and December 13, 2022.
For example, five years ago, 66% of baby boomer workers expected to retire after age 65, compared to 71% at the end of 2022, while 54% planned to work after retirement (compared to 55% in 2022) .
Total household savings for retirement have increased — from $164,000 five years ago to $289,000 in 2022 — but “for many, their savings may not be enough for a retirement that could last longer than 20 years,” says Catherine Collinson, CEO and president of the Transamerica Institute and TCRS, told Yahoo Finance.
For a large proportion of workers, the outlook is bleak. According to the researchers, most workers (53%) say they simply don’t have enough income to save for retirement. Respondents expect a range of income sources for retirement, including savings from 401(k) to Social Security. But more than a third – 36% – said they want to work to make ends meet.
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While working longer hours is all well and good, these people may not want to rely on it.
“In theory, the idea of working longer and retiring later sounds like an ideal solution to not having enough retirement savings,” Collinson said. “However, in practice it can be very difficult to achieve, especially if you don’t take good care of your health and keep your professional skills up to date.”
The story goes on
And, to put it simply, many workers don’t do the work to ensure they can keep working. Less than six in 10 workers say they stay healthy to continue working (58%) and less than half (49%) maintain their job skills. Even fewer workers take courses to learn new skills (24%) and earn a new degree, certification, or job title (17%).
What drives you to work until you drop? The lack of trust in the retirement system ranges from concerns about how much they have saved to uncertainty about Social Security and Medicare to not understanding who to turn to for financial advice.
In fact, according to the latest annual survey from the Employee Benefit Research Institute (EBRI) and Greenwald Research, confidence in retirement in the US has fallen the most since the Great Recession. Just 64% of workers are very or somewhat confident they will have enough money to live comfortably in retirement, a significant drop from 73% in 2022.
Not since 2007-08 and 2008-09, when the economy was in a deep recession, has there been such a sharp decline in confidence about retirement, said Craig Copeland, director of wealth benefits research at EBRI, a nonpartisan research firm in Washington , DC and chief investigator of the group’s 33rd Annual Retirement Confidence Survey.
Transamerica Center for Retirement Studies
Workers “across generations” who plan to work in retirement
The idea of continuing to earn a paycheck in retirement isn’t just being embraced by a handful of people unwilling to put the money in their pockets. According to the Transamerica survey, workers of all generations plan to continue working after retirement. More than half of Gen Z, 56% of Millennials, 54% of Gen X and 55% of Baby Boomers plan to work in their golden years.
Here’s some data to show why: Workers planning to work past age 65 and/or into retirement – or already doing so – cite both healthy aging (80%) and financial reasons (78%) . Other common considerations include “concern that Social Security will be less than expected” (33%), “you can’t afford to retire” (31%) and “you need health care” (27%). ).
Persevere: About a quarter of workers surveyed by the Transamerica Center for Retirement Studies said their employer offers flexible work hours. And only 21% enable employees to reduce their working hours and switch from full-time to part-time. (Getty Creative)
“Employers just don’t get it”
The truth is, even if you’ve saved enough to cover your living expenses in retirement, it’s a smart plan to continue earning a paycheck after you’ve retired from your full-time job. It can be a financial safety net, making it easier to avoid drawing on retirement savings so funds can continue to grow. And it can make it easier to delay Social Security payments. If you wait until age 70 to claim your benefits, you will receive deferred pension credits equivalent to an annual increase in your pension of approximately 8% per year for each year between your full retirement age and age 70 if the credits are not more to be accumulated.
There are also psychological and health reasons to consider, including being connected to a social network and feeling relevant.
The problem is that life often throws unexpected events at you—from health issues to caring for family members like your spouse—that make life difficult.
Another glaring mistake: According to Transamerica, a whopping 17% of workers say their employers are not age-friendly. Only four in ten respondents (41%) say their employer offers transition support such as flexible work schedules and arrangements (23%). And just 21% allow employees to reduce hours and move from full-time to part-time, while 18% allow employees to move into positions that are less stressful or demanding.
Transamerica Center for Retirement Studies
This will be a problem for more than four in ten workers, who envision the transition to retirement either by reducing their working hours and having more time to enjoy life (26%), or work in another occupation that requires either less demanding and/or rewarding is higher personal satisfaction (18%), according to Transamerica.
“It’s exciting to see people targeting longer working lives and realizing the potential for longer lives than previous generations,” Collinson said. “But by and large, many employers just don’t get it yet… Many employers’ business practices are still guided by the now-obsolete mindset that work and retirement are mutually exclusive.”
Ultimately, the labor shortage could lead to more job opportunities. “Sharp declines in birth rates have depleted the working-age population in leading economies, prompting employers to seek new workers, including older workers,” Bradley Schurman, demographics strategist and author of The Super Age, told Yahoo Finance. “And that’s pushing some leading employers to develop new retention and recruitment strategies.”
Kerry Hannon is a senior reporter and columnist at Yahoo Finance. She is a workplace futurist, career and retirement strategist, and the author of 14 books, including In Control at 50+: How to Succeed in The New World of Work and Never Too Old To Get Rich. Follow her on Twitter @kerryhannon.
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