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Working Longer is More than a “Twofer”

By Harry S. Margolis

An article in The New York Times about the effect of the great recession on retirement planning quoted David Certner of the AARP saying that working longer is a “twofer” because:

It means one more year in building up your pension or 401(k) and one less year withdrawing money to live on in retirement.

I think working longer provides even more benefits, both to the worker and to society in general, including:

  • More purpose in life.  Working gives use a sense of being useful and needed.  Retirement can make us feel less important and like we’re taking from society rather than contributing.  Of course, many people in retirement enjoy the freedom and lack of stress and many find other ways to contribute, such as through volunteering or caring for family members.  Also, with financial freedom, one can retire from one profession and begin working in another field, whether full- or part-time — a so-called “encore” career.
  • Preservation of skills.  Older workers have valuable skills and experience.  The longer they postpone retirement, the longer they will continue to contribute their knowledge to the general good.
  • Addressing the worker-retiree imbalance.  We’ve all seen statistics that show that the ratio of workers to retirees — the so-called “dependency ratio” — is going to be much less in the future than it has been in the past, contributing significantly to the huge fiscal imbalance facing the nation.  The longer we stay on the working side of the ratio before moving over to the retiree side, the less the imbalance.
  • Better health.  While I haven’t seen statistics to prove this, it seems that some people stop working and then fill their days going from doctor to doctor.  Perhaps working keeps illness and debility at bay.
  • Larger Social Security benefits.  The longer you postpone taking Social Security, the larger your benefit (up until age 70).  The Times article provides the example of a beneficiary who would receive $1,500 a month at age 66.  If she retired at age 62, she would receive only $1,125 a month, a loss of $4,500 a year.  If she waited until age 70 to retire, she would receive $1,980 a month, a gain of $5,760 a year.

Of course, if you hate your work or cannot work due to health reasons, then retire.  But the standard retirement age of 65 is arbitrary.  It was set when life expectancy was much shorter than it is today.  With a 50 percent chance that at least one member of a couple age 65 today will live to age 92, 27 years is a long time to be retired, both in terms of being able to afford to live that long without working and staying occupied with interesting activities.

In short, people should retire at an age that works for them, rather than the same age for everyone.  And “retirement” should not mean never working again, but more flexibility to work at the job you prefer and the number of hours or days per week that makes sense for you.

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