The Reality Behind the Idea of Working Longer

By Laura Kim and Angela Antonelli

While the idea of retiring by age 65 becomes increasingly outdated, how realistic is the expectation that Americans can simply choose to work longer? Older workers face a difficult set of circumstances, with those wishing to remain employed finding it increasingly difficult to land and keep jobs, while many who might prefer to retire must keep working to make ends meet.

With so many workers financially unprepared for retirement, it should come as no surprise that more adults expect to keep working longer. According to the Employee Benefits Research Institute (EBRI), 67 percent of workers surveyed do not expect to stop working before age 65.

According to a report by the Government Accountability Office, an alarming 55% of households ages 55–64 have less than $25,000 in retirement savings and 41% have no funds set aside at all. Overall, the median amount of savings for households age 55 and older was $109,000 in 2013. That paltry nest egg would likely yield $405 per month in retirement — not nearly enough for retirees increasingly dependent on their own savings to pay the bills.

Those without sufficient savings may feel compelled to continue to seek employment. Some individuals may have reasons other than financial security to continue working past 65. In either circumstance, the research shows that the decision to work longer isn’t as simple as it may seem.

Older Workers More Likely to be Forced Out of Jobs

A 2018 Urban Institute analysis of full-time workers in their early 50s found that two out of every three eventually left their jobs involuntarily, with 56 percent citing “employer-related” reasons such as layoffs or business closings and an additional 9 percent pointing to poor health or family concerns. The likelihood of those aged 51 and older experiencing an employer-related job loss increased sharply with the worker’s age.

Meanwhile, the percentage of retirees who report having been at least partly forced to retire has also increased over the years, rising from 33 percent in 1998 to 55 percent in 2014. Men, African Americans, and those who did not graduate from high school were the most likely to suffer this fate.

Older Workers Who Lose Jobs Experience Long-Term Impact

After facing a sudden, unexpected job loss, older workers have greater difficulty in finding a new job than their younger counterparts. In addition, the impact on their household finances is more likely to have lasting consequences and follow them well into their elder years. The Urban Institute found that only 1 in 10 older workers who involuntarily lost their jobs ever returned to the same level of pay again. Overall, these households saw median income plummet 42 percent, from $93,710 to $54,810.

The impact continues into retirement, with median income in households that experienced an involuntary job loss being 14 percent lower than for those who did not — even though the two groups had nearly identical earning levels before unemployment.

As unemployed workers reach Social Security eligibility at age 62, the risk increases that they will stop their job searches. Those who opt for this early entry into retirement face further financial risk, with 40 percent of workers in their 50s today who retire at age 62 likely to see their income levels fall to less than twice the federal poverty level.

Older Workers Face Barriers to Finding Employment

Workers older than age 50 who lose their jobs and want to return to work will find that they face many new challenges that they have not confronted previously. A variety of factors contribute to a difficult journey to continued employment for individuals who become job-hunters in the years leading up to retirement.

• More likely to face a long period of unemployment. Older workers are more likely to be unemployed for at least six months after losing a job. The Bureau of Labor Statistics (BLS) found that nearly 45 percent of those 55 or older who were unemployed had been looking for a job for at least 27 weeks, compared to 36 percent for those between 25 to 54 and 22 percent for 16 to 24.
• More likely to resort to unstable employment. Older adults increasingly find themselves in uncomfortable work arrangements, with the percentage of workers older than age 62 who report unstable hours and low pay rising from 14 percent in 2005 to 24 percent in 2015. They are also more likely to take part-time jobs, with 40 percent of those 65 and older working less than 35 hours a week, compared to 18 percent of those aged 16 to 64.
• More likely to be self-employed. The BLS reports that 16 percent of those 65 and older report working for themselves, as compared to 9 percent of those between 55 and 64 years old.
• More likely to face discrimination. Age discrimination represents a real concern for older workers who find themselves in the job market. A study in which 40,000 fictitious résumés were sent in for job openings found a pronounced bias against older workers. For example, the résumés of older female applicants for administrative jobs were 47% less likely than those of younger workers to generate a call-back for an interview. The GAO found that employers would be less inclined to hire older workers based on health insurance costs, higher wages, and a reluctance to train employees who they believe will not work for much longer.
• More likely to give up on a job search. In any given four-month period, 1 in 5 job-seekers older than 55 find a job — while the same percentage simply stop looking for many of the reasons outlined here. Workers who have access to a pension, savings, or Social Security benefits are more likely to stop looking for employment. Local labor market conditions, as measured by the state unemployment rate, have a surprisingly small impact on this outcome.

Older Workers May Be Unable to Keep Working

An inability to find a job isn’t the only reason that older workers may not go back to work. Some individuals may be held back from reentering the workforce due to poor health, disability, or caregiving responsibilities. The Brookings Institution found that health and caregiving were the leading causes cited by those 55 to 64 who had not taken paid employment for the entire year in 2014.

In addition, education plays a significant role in employment outcomes for older workers. A study looking at individuals age 63 to 65 found that 42 percent of those with no college education reported experiencing health conditions that limited their ability to work compared to 26 percent of college graduates. In fact, those with lower levels of education saw less improvement in factors such as health, life expectancy, and working conditions that have helped to delay retirement for those who have graduated college.

Conclusion

With one quarter of the workforce projected to be made up of those age 55 and older by 2024, the issues facing these workers will only continue to become more relevant. As Americans live longer, many experts believe that working longer may be the answer to ensuring a financially secure retirement — but that assumption may not match up with the reality that many older workers experience. The challenges facing older workers who want to keep working must be addressed to provide financial stability for a growing segment of the population.

Laura Kim is a Senior Research Associate and Angela M. Antonelli is the Executive Director of the Georgetown University Center for Retirement Initiatives (CRI).

September 2019, 19-06