Older workers head for retirement — and don’t retire
Before the recession, economists predicted a massive wave of retirements would begin in the 2010s, as the baby boomer generation (those born between 1946-1964) started hitting 65.
And it is certainly the case that some boomers are retiring. But not in the numbers, or at the pace, that economists earlier predicted. In fact, the labor force participation rate for people 55 and older (at 39.9 percent in June 2015, according to the latest data from the Bureau of Labor Statistics) is near its highest level in several decades, up by approximately one-third since 1990.
A recent report by AARP crunching survey data of older workers finds that nearly half (44 percent) are now planning to work part-time after they reach retirement age, and one-third (33 percent) are delaying the age at which they expect retire. Factors driving these decisions include many older workers’ and retirees’ financial losses during and after the recession, and their financial concerns going forward, especially in light of increasing life-expectancy.
Many older Americans have little choice in the matter and simply need to continue working as long as they can, if they can. The same AARP report finds that nearly half of Americans 50 and over have $25,000 or less saved for retirement. The Economic Policy Institute, which researches labor-force trends, estimates that there are 57,000 men 70 to 74, and 69,000 women 75 and up, who are currently working but would not be in the workforce today if the recession hadn’t hit their savings and earnings so hard.
This generation of would-be retirees is the Woodstock generation, and at 79, attorney Martin Cramer precisely fits the bill. He was at Woodstock; in 1969 he was working as a young associate for the New York law firm that represented the festival promoters and some of the artists who took the stage that legendary weekend.
“I remember clearly, [New York] Lt. Gov. Malcolm Wilson was in charge, and he wanted to send in the National Guard in uniform,” Cramer remembers. “And I said, 33-year-old me, I said to his chief of staff, ‘If he does that, I’ll sue all you guys, and you’ll be responsible for the biggest riot in the state.’”
Cramer was on vacation with his wife, kids and grandkids on a recent July weekend at his country house in upstate New York. It’s a house he built himself but can no longer work on because of arthritis in his hands. He gave up commercial litigation several years ago and no longer goes into court — he found that his hearing loss was compromising his practice.
Still, “vacation” is real for Cramer. He continues to work three to four days a week in New Jersey, handling wills, trusts and estates for a wide clientele that has been with him for decades.
“I realize I do it because I enjoy it,” Cramer says. “I need the intellectual stimulation. I need something to keep me actively occupied.”
Economist Matthew Rutledge at the Boston College Center for Retirement Research says this trend is widespread.
“The labor force participation rate for people 55 and older is basically as high as we’ve seen in a couple generations,” Rutledge says. “People used to work a long time, back when pensions and Social Security were more generous. Then, for a long time, people were retiring in their early 60s. Now it’s more like 64 or 65, especially for men, and women are catching up as well.
“As life expectancy increases, so are retirement ages,” Rutledge continues. “So people are responding to the fact that they’re going to live longer and therefore they have more years to cover. And because they’re now healthier, each one of those years is a little bit easier to work.”
The recession and slow recovery mean many seniors have less to work with than they anticipated. Cramer and his wife lost a bundle in the Bernie Madoff scandal. Others have had more mundane setbacks.
“Social Security benefits aren’t going to be replacing their income at the rates that they used to in previous generations,” Rutledge says. “People’s pensions aren’t as generous as they used to be in all likelihood, people just haven’t saved all that much, housing values have fallen, as we saw during the recession.”
Bill Saphir, 71, of Portland, Oregon, can relate to this. In 2008, he was downsized out of a senior management job in health care. Now, he’s trying to make it as an independent consultant.
“There’s creative juices that I still have to work out, and that means working,” Saphir says. “I had a small cushion, and it is running down. My wife wants me to retire. But I really can’t— we can’t afford it.”
But if Martin Cramer keeps doing wills and estates into his 80s, if Bill Saphir is still a health care consultant well into his 70s, if thousands of other older workers decide to delay retirement, won’t that crowd out younger people coming up in the workforce?
Economist Matthew Rutledge calls this idea the “the lump of labor” fallacy: “There’s only a certain amount of jobs out there, and if an old person’s holding that job that means a young person isn’t.”
Rutledge says economic studies tend to show the opposite is true. “Old people working is good for the economy,” he says. “When old people are working instead of being retired, they have a lot more money to spend.”
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