The Senate Finance Committee held a hearing yesterday to discuss the increasing likelihood that seniors will need and want to delay retirement. Experts testified that Americans working until older ages will have a dramatic impact on the economy, Social Security, and especially their own personal finances. Here’s a look at the reasons the invited witnesses say Americans should choose to work during retirement.
Help Social Security. Seniors continuing to work past age 62 will help sure up the Social Security system. A 10 percent increase in labor force participation among Americans age 62 and older beginning in 2011 would reduce the projected Social Security actuarial deficit and push back the trust fund exhaustion date by an entire year from 2037 to 2038, according to calculations by Stephen Goss, chief actuary of the Social Security Administration.
Companies need you. Some employers are interested in keeping older workers around for their solid work ethic and productivity. The hope is that older workers will pass on some of their knowledge to younger employees. “The country needs them to work to sustain economic productivity and growth and to fill vital roles that demand their skills and experience,” says Marc Freedman, founder and CEO of Civic Ventures and author of Encore: Finding Work That Matters in the Second Half of Life. He says that the health care, education, and green jobs sectors will increasingly have a demand for experienced older workers.
Give back. Delaying retirement also allows seniors to use their energy and talents to give back to the community. Freedman called on congress to fund encore fellowships that would help experienced workers transition into public service, nonprofit, and government jobs.
Boost the economy. An aging population that continues to work will have more income to stimulate the economy. “An increase in the number of these workers would increase federal and state income tax revenues,” says Senator Max Baucus, a Montana Democrat. States that have enough revenue coming in from existing taxes won’t need to increase taxes.
Flexible scheduling. Working longer doesn’t have to mean slaving away at a job you hate. Many employees are interested in a gradual transition into retirement. “Workers can reduce their hours of work at their principal job or work only seasonally. Their current firm can rehire them after they have retired for a period of time,” says Baucus. “Workers can go to work in another career or occupation or they can do their current kind of work at a different firm.” Bonnie Shelor, senior vice president of Bon Secours Virginia Health System, testified that phased retirement initiatives and flexible work schedules have attracted and retained older workers resulting in 40 percent of Bon Secours employees being age 50 or older.
“The traditional view of retirement as a permanent and complete exit from the labor force and from a full time job held since middle age does not describe most workers today,” says Nicole Maestas, an economist and group manager at RAND Corporation. Instead, many workers downshift into a part time job or even return to the workforce full time after a break. Retirees who re-enter the labor force often change occupations, typically shifting from managerial and professional occupations to jobs with less responsibility and often lower stress, such as sales, administrative support, and service positions. A quarter of 65-year-olds also work for themselves, RAND found.
Financial security. A longer life span means more years workers need to save and plan for. Working longer packs the double punch of giving you more time to save and reducing the number of years that savings must last. Says Freedman: “Financial planners are increasingly advising their clients: The best way to rescue personal finances is to work a few years longer.”