We've discussed the "working past retirement age" issue from both sides quite a bit. On one hand, if you can work later in life (past 65), you can stretch your retirement savings a lot farther (and it's even good for you to keep working.) That said, "keep working" may make sense, but isn't always practical or realistic. Many people have brought up this issue in comments, and today we'll add a piece from Yahoo to that list. Their key thoughts:
Rocco's story could serve as a cautionary tale for boomers who think they'll be able to fill the gaps in their retirement savings by working longer in their current jobs. It also illustrates the challenges for those who assume they alone will determine exactly when they'll retire.
The stark reality is that most of today's middle-age workers who want to continue working after 60 or even 65 will need to find a new source of income. While nearly half of baby boomers expect to work past 65, only 13% of current retirees surveyed this year by consulting firm McKinsey & Co. actually worked past that age. Forty percent of current retirees were forced to stop working earlier than they had planned, the survey found. The average age when current retirees left the workforce: 59.
As of 2005, just 60% of 60-year-olds, 32% of 65-year-olds and 19% of 70-year-olds were employed, according to the Bureau of Labor Statistics. Current retirees cited two primary reasons for quitting sooner than planned: illness and unemployment (job loss or downsizing).
Let's digest this for a minute. Here's what I'm getting out of this:
- In most cases, people will not be able to determine whether or not they'll be able to continue working -- especially at their current salary.
- Many of these people will have several years left even before Social Security kicks in.
So, this leads me to believe that we should all be setting our retirement ages at 59 and saving for retirement as if that's the age we'll need to go it on our own. And if we're able to keep working at that age, then that's great, our finances will be much better off when we do eventually retire. If we're not able to keep working (for whatever reason), then we'll be set based on our own savings.
The article goes on to share several other worthwhile pieces of information. For instance, it presents the two sides of the "is it harder for older workers to find employment or not?" debate. Here's the support for the suggestion that it is harder for older workers to find work:
To test whether age bias is real or imagined, researcher Joanna Lahey sent out about 4,000 résumés to firms in Boston and St. Petersburg, Fla., and measured response rates from employers. The results: A younger worker is more than 40% more likely to be called for an interview than a worker 50 or older, according to the 2005 study done through the Center for Retirement Research at Boston College.
Another sobering statistic: The average period of unemployment in 2005 was 24.1 weeks for job seekers 55 and older, compared with just 17.8 weeks for those under 55, a report by AARP found.
"It's a huge issue, and it really comes down to, 'How do I, the established job seeker who is 50-plus, how do I establish my differential advantage so it distinguishes me from my younger counterpart?' " says Damian Birkel, a career counselor and founder of Professionals in Transition, a support group for the jobless in Greensboro and Winston-Salem, N.C.
There is a great solution to this issue. Here's the one I thought of immediately:
Frustrated by the dearth of good jobs, older workers are increasingly becoming independent contractors or starting their own businesses.
Among workers 50 and older, 16% are self-employed vs. 10% for the overall workforce, according to a 2004 AARP study. About one-third of older self-employed workers started their businesses after 50, AARP said.
Self-employment allows older workers to put their years of experience to use. It usually also offers more flexibility than a traditional job. Fifteen percent of self-employed workers 51 and older reported having a health condition that limited the type of work they could do, compared with 8% of salaried workers in that age group.
And just to complete the debate, there's reason to believe that it may eventually be easier for older workers to find employment:
Employers are expected to face a skills shortage in coming years, and baby boomers provide a varied and experienced labor pool. Over the 2004-14 decade, total employment is projected to rise by 18.9 million jobs, or 13%. Over the previous decade (1994-2004), total employment grew at the same annual rate and rose by 16.4 million jobs, according to the Labor Department.
Here's my advice: plan and act as if it all depends on you and assume the worst-case scenario. Assume you'll need to retire at 59 (which really isn't the worst case, but it's a good estimate) and that you need to fund your retirement 100% yourself. Then start saving accordingly. At the same time, start developing hobbies and/or other business interests that could turn into a full-time job when you retire. Finally, get active! Studies show that exercising your mind and body are great ways to make sure you live a longer, healthier, and happier life. Doing this, you'll help to take at least one of the late-life employment challenges (illness) out of the equation.
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