A sharp decline in market and home values has convinced many people they’ll need to work longer. But can they?
The most obvious problem right now is the economy. It is a very difficult market to keep a job. The irony is that just as people recognize the need to work longer there are strong forces working against them.
[But] after this crisis is over, older workers need to face the fact that their productivity is, on average, equal to or lower than that of a younger person, whereas their cost to employers is either equivalent or higher. Basically, wages tend to go up and health care costs rise. And if you happen to have an old-fashioned defined benefit plan, those costs to employers are, of course, higher for you. So you have this basic mismatch between the productivity and the cost of older workers.
So, if I am an older worker, I have a bull’s-eye on my back?
It would be helpful to recognize that, on average, the cost-benefit calculation from the employer’s perspective is not favorable for you. So you really have to sell yourself. That involves saying to your employer, “Listen, I am planning to work until I am 67, and I am only 57 now, so that means you can count on me for ten years. I know what this company is about, and I want to be considered for training and promotion.” That goes over better with bosses than just sitting around going through Florida brochures.
What happened to early retirement? This is depressing.
When you suggest that working longer is the solution, there is this reaction: “I can’t work until my 90s!” [laughter] You don’t have to. We just want to get the message out that working two to four years longer makes such a huge difference [in your retirement security]. It’s not working forever. And we shouldn’t feel so persecuted for having to work longer. It treats work as this horrible burden. In fact, it is a calming thing to have that structure, and the social interaction and sense of accomplishment.
Besides an investing plan, we need a work strategy?
Exactly right.
What’s a good employment strategy if you’re in your 40s?
You can’t bumble along. You need to pick an age that it makes sense to retire and then, like a horse with blinders, stay focused on that goal. And you need to recognize that the ideal retirement age is your mid- to late 60s. Your 50s is no time to start moving into part time or sliding into retirement. I find this whole notion of gradual retirement just dangerous. At least it is when people in their 50s think that it applies to them.
Given that what you are doing today you are going to be doing for a long time, it is important to have a job that you enjoy, to the extent possible. Have a job that you can age with. Or, if you have a high-stress position today, start thinking about some trajectory that will take you to lower-pressure jobs as you age, but still build on your skills.
As you get older, there’s this tendency to get rid of things you don’t enjoy — people you don’t like, furniture you don’t like, clothes you don’t like. Psychologists we work with here refer to it as positivizing. To the extent work is distasteful as you age, there is this tendency to say, “I’m out of there,” and basically quit for what, in retrospect, look like frivolous reasons. You come home from a business trip stuck in the middle seat and say, “Never again.” Or you take a week off because of a broken ankle and enjoyed it, so you think you don’t need to work any longer.
Our hope is that if you know this about yourself — that it is a natural response — that maybe you can censor yourself a bit and not make decisions that don’t really work for you. We all just suck it up when we are young. Now we’re just going to have to suck it up longer.
Interested in reading more on the topic? Consider these studies from the Center for Retirement Research at Boston College:
Are Retirement Savings Too Exposed to Market Risk?
The Decline of Career Employment
The Housing Bubble and Retirement Security
Munnell’s most recent book, co-authored with CRR colleague Steven Sass, is Working Longer: The Solution to the Retirement Income Challenge.
