Retirement Patterns: Are Workers Outsmarting the Experts?

American Workers Are Finding New Ways to Afford Retirement

American workers are making progress on improving their retirement picture

For years, experts have warned that Americans will have insufficient savings for retirement and that penury was awaiting a generation of retirees. However, some recent studies indicate that American workers have been paying attention to these warnings – but responding in some different ways. Most significantly, it seems that large numbers of workers are remaining in the workforce beyond the “normal” retirement age. Interestingly, most of those staying in the workforce stay because they “want” to and not because they “need” to.

Here are some of the key data:

•      A recent poll released by Gallup noted that 74 percent of surveyed workers plan to work past retirement age – 11 percent on a full-time basis and 63 percent on a part-time basis. Although this represents a decline in those planning to work past retirement age since 2011 (when 81 percent of those surveyed expressed an intent to continue working) there are some interesting things going on beneath the surface:

           ‣        Since 2011 the major stock indices are up by over 50% and so workers looking at retirement might be tempted to rely on gains in their 401(k) plans to support retiring at a normal age. But yet, the percentage stating that they “want” to continue working has increased from 34 percent in 2013 to 44 percent in 2017. In effect, a growing number of workers might have additional retirement resources funded through market gains – but a significant number are choosing to stay in the workforce.
           ‣        The percentage of workers who want to continue working – but on a part-time basis – has been very consistent over the past six years: 63 percent in both 2011 and 2017. In effect, workers have discovered the concept of “phased retirement” without the need for elaborate new policies or glossy communication brochures from their employers.

•      Another study, using data from the Internal Revenue Service, looked at sources of income for individuals in the three years after beginning to receive Social Security benefits. In addition to relying on Social Security and retirement plans, almost half of the households in this study also received a significant portion of their income from ongoing employment. It was this additional employment income that allowed these households to minimize decreases in post-retirement income (and, in many cases, actually increase their overall income in the three years after beginning Social Security.)

The trends described in these studies are reversible – declines in the stock market and increases in unemployment could drive workers out of the workforce with diminished retirement savings. And, achieving adequate retirement income in the first few years of retirement is very different than maintaining that income level over a lifetime.

However, these reports do point to some very encouraging trends. By remaining in employment after retirement age workers can preserve existing retirement savings, increase saving with new contributions, and utilize employer provided health care coverage to help meet their retiree medical costs. This represents a retirement picture worth looking forward to.