Every day 10,000 people turn 65 in the US, yet more and more people approaching the age of retirement expect to keep working. A longer life expectancy than in previous generations is the reason many Americans ages 40+ expect they will work after retirement. In fact, 92% of people ages 40 and older said they plan to work after their careers end. While most people say that they want to continue to work after retiring so they can stay mentally sharp, the hard truth is that many are not prepared financially to retire. According to the census bureau, in 2017, 49% of adults ages 55-65 had no personal savings.
Americans are Aging out of Retirement
retirement became a concept in the United States with the passing of the Social Security Act in 1935, which set the official retirement age at 65. At that time, the average life expectancy at birth was 60 for men and 64 for women. So if you think about it, only those who outlasted the average life expectancy actually were able to participate in Social Security. However, thanks to advances in modern medicine the average life expectancy for Americans have vastly increased. For the last few generations, retirement has meant living out one's golden years with loved ones and supporting themselves through Social Security, which they'd paid into for so long. Yet recent studies show there's a growing contingent of middle-aged and older Americans who expect their retirement will at least partially be spent working.
With all of the planning that goes into retirement, people in their 40s and 50s anticipate having to work after their careers come to an end because of the longer life expectancy. They are hoping to only be expected to work 20 hours a week in a paid position, but that really depends on how they were able to save and prepare for their retirement in advance.
In preparation for longer lives, and to make their retirement last longer, many people plan to start saving more aggressively (if they already aren’t), reduce overall expenses as they approach retirement age, increase income outside of a full-time job, and get help from a financial advisor.
Reasons to keep working
The motivations for working through retirement are different than when you were in the midst of your career. It’s true that many Americans will need to work to support even the most basic needs, however, nearly 1/3 of Americans are planning to continue working after retirement "even if there is no financial need." In fact, people under the age of 40 said they looked forward to volunteering when they retire. with nearly half saying that they already have or would consider volunteering at a nonprofit or community center.
A large number of people are planning to retire “part-time”. Many people say that they would like to work longer in their lifetime and take short one-year retirement breaks rather than work without a break until they retire full-time. Some of the reasons behind this is to keep their mental acuity, keep from getting bored, and have social interactions with others. Others plan to continue to work after retirement to keep themselves financially secure…something that could be avoided by implementing proper retirement saving strategies at an earlier age.
The Power of a Pandemic
The coronavirus pandemic has made it’s mark on retirement. One of the many things that the pandemic has impacted in the United States is workers' approach to retirement – whether or when it happens, how it happens and what it looks like if it does happen. According to Pew Research 50.3% of Americans ages 55 and older are now retired, rising from 48.1% during the pandemic – but how many are truly out of the workforce for good? The pandemic has forced many small business owners who saw their earnings fall in 2020, to reconsider the timetables of their careers, including when and how they plan to scale back their work in order to focus on other things.
Ironically, though, the fallout from the pandemic has also led to many people to push back plans for retirement or have to continue working into their retirement years. The pandemic has highlighted the important things in life outside of work, while also making it more difficult for many to completely stop working to enjoy those things. As a result, many are now considering their retirement with the thought that they may work part-time, consult, or focus on their own business, which can give them the flexibility to enjoy their golden years while still bringing in a modest income.
Meanwhile, Americans are fleeing expensive housing markets for more affordable communities and seeking ways to incrementally improve their incomes during retirement which may include choosing to wait on Social Security benefits until age 70, when they can maximize their payments.
What has become clear is that due to the longevity of our lives, we are forced to think about our personal financial journeys. We are no longer in a one-size-fits-all model way of retirement.
Here at ValuTeachers, we can help you on whatever retirement journey you are looking to take. It’s never too early or too late to get started on the right path