As retirement planning becomes increasingly complex, many American workers are leaning toward an option that seems both practical and reassuring: the notion of working longer. A recent survey conducted by CNBC and SurveyMonkey highlights that approximately 27% of U.S. adults intend to remain in the workforce during their retirement years primarily to bolster their income. This statistic underscores a broader trend among workers who feel inadequately prepared—financially—to support themselves after they stop working full time.
The Illusion of Financial Security in Retirement
While the prospect of extending one’s working life might appear beneficial, financial experts urge caution regarding this strategy. Many individuals find their plans upended by unforeseen circumstances such as health issues or layoffs, making the reality of working later in life significantly different from their expectations. Philip Chao, a certified financial planner and founder of Experiential Wealth, encapsulates this sentiment well: “It sounds great on paper, but reality could be very different.”
Statistics reveal a substantial discrepancy between when workers expect to retire and when they ultimately do retire. Since the early 2000s, polls have shown that retirees generally exit the workforce about five years earlier than they anticipated. In 2023, for example, the average anticipated retirement age for non-retirees was 66 years, while retirees were actually retiring at an average age of 62. Instead of assuming that working longer is a guaranteed solution, it’s crucial to recognize that circumstances can quickly change and alter this important life stage.
A significant portion of the American workforce is not only planning to work past traditional retirement age but may need to do so out of financial necessity. According to research from the Employee Benefit Research Institute (EBRI), an alarming 46% of retirees leave the workforce earlier than they initially planned. The reasons are sobering: 35% retire due to health complications or disabilities, while 31% must respond to changes within their organizations, such as permanent layoffs.
These findings starkly contrast with the aspirations of many workers, a third of whom expect to work until they are at least 70—or even longer. The reality is that only a measly 6% of retirees ever reach that milestone. This situation underscores a critical flaw in relying on extended work life as a fallback plan. Chao’s warning that it can be a “very dangerous assumption” captures the precarious nature of planning for retirement in today’s economic landscape.
Nevertheless, there are undeniable advantages to extending one’s career—potentially delaying retirement can enable individuals to preserve their savings and continue accruing benefits, such as Social Security. By holding off on withdrawals from retirement accounts, workers can allow their investments to flourish longer. Moreover, postponing Social Security claims can result in higher monthly benefits, which can significantly affect one’s financial wellness.
Interestingly, about 26% of workers express a desire to continue working during their retirement years, indicating that there may be non-financial incentives driving this trend. For many, work brings fulfillment, identity, and social connections. In addition to financial considerations, the psychological aspects of remaining engaged at work can lead to improved health and longevity.
However, the benefits of working longer are contingent upon the nature of the work itself. Job stress and the physical demands of certain occupations can negate these advantages, creating potential harm to both mental and physical health.
Shifting Economic Landscape and Work Opportunities
Societal shifts away from manufacturing towards service-oriented and information-driven sectors are reshaping the landscape for older workers, facilitating the possibility of longer careers. According to Gallup analyst Jeffrey Jones, this transition allows for a more adaptable workforce and increases opportunities for individuals to stay engaged even as they age. This adaptability could potentially mitigate some of the risks associated with unplanned retirements.
However, while the opportunity exists, it’s essential to recognize that not all workers will find this avenue accessible. Factors such as educational background, access to job retraining programs, and the economic environment all play significant roles in determining who can successfully extend their working life.
While the idea of working longer can be a sound strategy for some, relying solely on this path to retirement security is fraught with risks. Individuals should consider a multi-faceted approach to their retirement planning that acknowledges both the potential benefits and the realities of life’s unpredictability. Given the numerous factors that contribute to successful aging, a holistic view that encompasses financial preparedness, health considerations, and job satisfaction is essential. As the workforce evolves, so too must our strategies and expectations regarding retirement.