We all know that retirement today is not the same as it was for our parents. Pensions are nothing but a dim memory for many of us, and we all worry about Social Security and the cost of health care. Yet our life expectancies have increased, and we can look forward to enjoying healthier, more active lifestyles either at home, in a sunbelt paradise or perhaps in some kind of senior living facility.
Here are seven current trends in the world of retirement, outlined from a recent study by the University of Michigan Retirement Research Center:
1. The traditional career arc is changing. The experience of a decades long full-time job followed by full retirement is becoming the exception rather than the rule. Instead, many workers are leaving full-time work in their 50s, and taking lower-paying "bridge" jobs they may hold for several years before finally entering full retirement. People in bridge jobs have different attitudes and expectations compared to full-time workers, which significantly affects loyalty, commitment and incentives in the workplace.
2. More people are choosing semi-retirement. Due to the lack of a secure pension or forced early retirement, a significant group of retirees are now holding down part-time jobs. According to the University of Michigan study, the proportion of partially retired workers has risen from virtually zero to 15 percent for 60 to 62 year olds, and is over 20 percent for 65 to 67 year olds, up from 5 to 10 percent in 1960.
3. Workers have less control over the timing of their retirement. Despite efforts from the government to ban age discrimination, multitudes of workers in their 50s and early 60s have been laid off or forced into early retirement. In addition, almost as many late-stage workers are being passed over for new jobs. At least some of this phenomenon results from businesses responding to difficult economic conditions since 2000. Or, as the study says, "Workers around normal retirement age (63 - 67 years old) are especially sensitive to changes in the national unemployment rate."
4. But they also have more flexibility. In 1970, Social Security introduced a gradual increase in the delayed retirement credit, meaning that employees working beyond normal retirement age continue to build up credits for Social Security. Workers now have the flexibility to take retirement benefits anywhere between 62 and 70, and theoretically receive the same expected lifetime benefits. Also, the decline in defined-benefit pension plans may have reduced instances when workers face age-specific work disincentives. In other words, fewer companies require workers to retire at age 65 whether they want to or not. That's the silver lining of defined contribution plans: Now you can decide when to retire, rather than the pension plan pushing you to retire at a certain age.
5. The more money you make, the more likely you will keep working. It seems counterintuitive. You'd think the lower your salary, the longer you'd have to work. But it doesn't pan out that way, presumably because higher paid workers have better jobs they not only want to keep, but are also able to keep. The full-time employment rate for 60 year olds on the lower end of the pay scale is less than average, and for 65 year olds it is less than half the average. Highly paid workers have had a different experience. The average full-time employment rate for top earners ages 65 to 67 went down in the 1990s, but has been rising ever since – suggesting longer careers but less expected retirement security for this group.
6. People spend longer periods of time in part-time careers. Those who leave the full-time workforce early need to make more income. They tend to fall into the lower end of the pay scale to begin with, and in the end have devoted fewer years to earning a salary. Therefore, instead of taking full retirement at 65 or 66, many keep working their part-time jobs until age 70 or beyond to make up for lost wages earlier in their career.
7. Inflation, housing prices and the stock market have little impact on retirement. The study found that a high inflation rate results in a slightly higher retirement rate, because wages lag inflation and therefore lower the rewards of working. Housing prices and stock market performance have a slight bearing on the timing of retirement, primarily for wealthier individuals. But most people time their retirement based on their own tolerance and ability to work, not on general economic conditions or prospects for the stock market.
Tom Sightings is a former publishing executive who was eased into early retirement in his mid-50s. He lives in the New York area and blogs at Sightings at 60, where he covers health, finance, retirement and other concerns of baby boomers who realize that somehow they have grown up.