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Working Longer: How and When We Retire

By Anna M. Rappaport

Retirement Section News, June 2022

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The demographics of the U.S. population and the population in many other countries have changed dramatically over the last 100 years. Expected life spans, both at birth and at age 65, have increased significantly and retirement has become an accepted part of the life cycle. Retirement ages have declined in the last 50 years, with a little creep up in the last few years. The result of these changes is that people who retire in their early to mid-60s include many more retirees who will depend on their retirement resources for more than 20 years, some who will depend on them for 30 or 40 years, and a few (people who live beyond age 100) who will depend on them for even more than that. At the same time, U.S. policymakers and society in general have failed to anticipate and adapt well to current longer life spans. This trend should be a national priority going forward but it has received relatively little attention in either the policy or business community.

It is possible to retire gradually or all at once. Some people retire and then return to work and some gradually reduce their commitment to work. I see advantages to both individuals and employers in systems that allow the full-time workforce to choose options for flexible work, particularly for people nearing workforce exit age. The Society of Actuaries Research Institute publication Work and the Retirement Journey—Essay Collection was published in 2021. This essay collection includes two essays focused on practical issues for both the individual and the employer:

While issues related to how and when we retire, and what options individuals have as they move out of the labor force, have been concerns for a long time, they have not risen to being major priorities for either policymakers or most businesses. COVID-19 has raised additional issues about changes in retirement ages and how we retire and there are many unanswered questions today. The Society of Actuaries Research Institute 2021 Generations survey found that about 30 percent of the generations who were not yet at retirement age had changed or were considering changing their plans for retirement, with about two-thirds planning to retire later. Meanwhile, in the latter half of 2021, many employees left their jobs, calling attention to the “Great Resignation.” Women who were caregiving for older relatives or children, and/or nearing retirement age constituted a significant group of those leaving jobs and retiring earlier. The reasons for retiring earlier included personal safety and burnout, difficulty in finding caregiving support, and changed personal priorities. The people most likely to leave jobs were those who were working directly with the public, particularly in areas where there were worker shortages and more pressure on employees.

Issues related to good practices for older workers, creating opportunities and options have been discussed for a long time. John Wiley's publication Global Business and Organizational Excellence has recently published its 40th anniversary issue. This publication includes some of the most popular articles in its 40-year history and comments updating the story from some of the authors.

One of the articles in that publication, first published in 2003, is “The Aging Workforce Raises New Talent Management Issues for Employers,” which I co-authored with two colleagues. (Rappaport, Bancroft, & Okum, 2003). I started studying demographics in the early 1970s and have long been concerned about the societal challenges linked to demographic shifts. As the population aged substantially over the last century, it seemed clear that retirement ages and opportunities for phased work strategies should be addressed, but this issue was not a top priority for policymakers or business. My co-authors and I felt it was important to all stakeholders that older workers have options and opportunities for work, and that better human resources practices were needed in dealing with this issue. That led to our collective interest in the 2003 article.

My view is the problems discussed are real and still exist today, and the solutions suggested still make sense, but the world has changed. Some of the key factors that are relevant today include:

“Gig” employment: There are no prescribed and commonly accepted career paths for older workers who want to work longer. People need to find their own way. There has been a major growth in the gig economy, opening up some options such as freelancing and consulting. Gig employment requires time and sometimes new skills, such as sales and technology skills. For some, the skills needed to manage a small gig-type business have been entirely new, and it has been up to the individual to figure out how to get them. (It is also important for people to understand there could be great risk to using assets needed for retirement by investing them in a new business.)

Employee benefits: Employee benefits have changed, removing the incentives that often facilitated and encouraged early retirement. The changes in benefits created financial incentives for people to work longer.

  • There has been a major decline in defined benefit retirement plan coverage. Employers have moved away from these plans and employment has shifted away from the traditional employers most likely to offer them.
  • Retiree medical coverage also declined and that made it more difficult for people to retire early, prior to Medicare eligibility.
  • While retiree medical plans are offered much less frequently, the Affordable Care Act has reduced the economic necessity of staying with a job until Medicare eligibility in the United States. However, the health plans offered through the Affordable Care Act markets can be quite expensive, except for people who have subsidies. Medical expenses remain an important issue even into the Medicare years.
  • In addition to employee benefit plan changes, Social Security also evolved with a liberalization of the earnings test and reductions in benefits for early retirement.

These changes also removed financial barriers to work options that could help people work longer on a reduced basis, enabling them to effectively gradually retire. The biggest barrier to work options was the inability to secure health insurance. A second barrier was the impact of work on the ability to retire, collect Social Security and pensions, but continue to work at the same time.

Defined contribution plans are the most common primary retirement programs today, and they usually do not include incentives to retire at a specific age. They require individual decisions about how much to save, when to save, how to invest funds, when to retire and how to withdraw funds during retirement.

Technology: Technology advances are rapid, accepted more quickly and by more employers than in the past, and employers have changed work to become more flexible:

  • There have been many changes in technology so that many jobs are done differently than in the past. This has changed potential opportunities for older workers. It has also placed a premium on learning new technologies and adapting.
  • During COVID-19, many employers have been accustomed to having more employees work remotely, and they have had to be more flexible about employment rules. This creates the potential for more flexible roles and work opportunities for older individuals.
  • Remote work often requires relatively sophisticated technology. While technology and remote work create opportunities, they also create challenges. Some older workers have found it difficult to catch up to the new technology.

Changing individual goals: Over the past decade, individuals have often changed their personal retirement goals, reconsidering activities of importance to them and the potential opportunities to work in retirement. COVID-19 further encouraged people to rethink their priorities and values.

The Great Resignation and the workplace: Attention has been drawn to issues related to the workplace. This is partially the result of workplace shortages, but it also reflects values:

  • As expected, there have been talent shortages in specific occupations. Some physically demanding jobs are still unavailable to older workers, but creative thinking could open even these jobs if tasks are analyzed and divided to create part-time and/or administrative positions to support those on the front lines.
  • There have been substantial worker shortages in early 2022, and blue collar and service jobs are heavily represented among the jobs with shortages. The shortages, together with redesign of jobs, have created opportunities for people with the relevant skills.
  • Age bias has long been an important factor in determining older worker opportunities. It remains a factor when considering this issue. It seems very odd that Americans accept the idea of judges, members of Congress, corporate directors, symphony conductors and even presidents working to high ages, but expect corporate employees to retire in their early 60s.
  • There has been a growing focus on diversity, equity and inclusion, and more companies are including age as a diversity factor. Older workers who want to continue need to stay caught up with culture and the demands of the job, as well as the opportunities created by the changing workplace.

Interest in this topic: We are not alone in our interest in this topic. The World Economic Forum and Mercer are working cooperatively on a project linked to understanding and responding to The 100 Year Life. Similarly, the Age Friendly Institute offers a program for certifying age friendly employers.

Conclusions

The populations in the U.S. and many other countries are aging as a result of a long-term growth in life spans, variations in fertility rates, and immigration. Retirement patterns are not being adjusted to match the population change, and there is no general public policy and business focus on adjusting to the new demographics. The U.S. is badly in need of such adjustments. An important area of focus is new job options that permit gradually moving into retirement, and different options for work. Other areas for adjustment include housing, the supply of caregivers, long-term care and age-friendly communities. I encourage all of the readers of this article to see what they can do to move these issues forward. Actuaries are very aware of their importance and can be a force in encouraging progress on important issues.

Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries, the newsletter editors, or the respective authors’ employers.

Anna Rappaport, FSA, serves as chairperson of the Committee on Post-Retirement Needs and Risks. She can be reached at anna.rappaport@gmail.com.

References

General business and workforce issues

Rappaport, A., Bancroft, E., & Okum, L. (2003). The aging workforce raises new talent management issues for employers. Journal of Organizational Excellence, 23(1), 55- 66. https://doi.org/10.1002/npr.10101

John Wiley's publication Global Business and Organizational Excellence has just published its 40th anniversary issue.
It includes the article "The Aging Workforce Raises New Talent Management Issues for Employers", published in 2003. Articles were chosen based on the most interest in them. It also includes a discussion by the co-authors of how things have changed since 2003.

Work at older ages and phased retirement

Phased Retirement After the Pension Protection Act, 2007. The Conference Board. https://www.conference- board.org/publications/publicationdetail.cfm?publicationid=1289

Rappaport, A. Reboot, Rewire or Retire? Personal Experiences with Phased Retirement and Managing A Life Portfolio. https://www.kitces.com/blog/anna-rappaport-phased- retirement-life-portfolio-health-people-pursuits-places/

Government Accounting Office. Phased Retirement Programs, Although Uncommon, Provide Flexibility for Workers and Employers GAO-17-536. https://www.gao.gov/products/gao-17-536

Rappaport, A., & Driver, T., Working Longer to Improve Retirement Security: Addressing Workplace Issues. Society of Actuaries. https://www.soa.org/globalassets/assets/Library/Essays/2018/securing-future- retirements/2018-securing-future-retirements-rappaport-driver.pdf

Rappaport, A., & Driver, T. Working Longer to Improve Retirement Security: Improving Public Policy. https://www.soa.org/globalassets/assets/library/newsletters/retirement-section- news/2018/october/rsn-2018-iss96-rappaport3.pdf

Risks and Process of Retirement Survey: Key Findings and Issues: Working in Retirement, 2011. Society of Actuaries. https://www.soa.org/globalassets/assets/files/research/projects/research-key-finding- working-retire.pdf

Society of Actuaries Essay Collection, Work and the Retirement Journey 2021. https://www.soa.org/resources/essays-monographs/work-retirement-journey/

The Aegon Retirement Readiness Survey, 2018. The New Social Contract: A Blueprint For Retirement in the 21st Century. Aegon Center for Longevity and Retirement. https://www.aegon.com/contentassets/6724d008b6e14fa1a4cedb41811f748a/retireme nt-readiness-survey-2018.pdf

The Sightlines Project: Stanford Center on Longevity. https://longevity.stanford.edu/the- sightlines-project/ 

For U.S. and International employer and workforce issues:

Billings, M. N., & Rappaport, A. (2011). Living to 100: Challenges and Opportunities for Employers, Society of Actuaries, Living to 100. https://www.soa.org/globalassets/assets/files/resources/essays-monographs/2011- living-to-100/mono-li11-5a-billings.pdf 

For U.S. and International retirement age issues:

Rappaport, A. (2014). How Well Have Retirement Systems Adapted to Longer Lives? Society of Actuaries. https://www.soa.org/globalassets/assets/files/resources/essays- monographs/2014-living-to-100/mono-li14-3b-rappaport.pdf

Determination of Retirement and Eligibility Ages: Actuarial, Social and Economic Impacts, 2016. International Actuarial Association. http://www.actuaries.org/CTTEES_PIWG/Documents/PIWG_Vancouver_Item4_Reti rement_Eligibility_Ages_Sept30.pdf