Why Retiring Later Might Not be a Good Idea

Think you’ll be working past the age of 65? Are you one of the fortunate Americans who love their job and can’t imagine doing anything else? While that’s a great position to be in, the statistics may not be in your favor.

These days, Baby Boomers continue to make up a substantial share of the labor force, despite the fact that many are well beyond the traditional retirement age of 65. What’s more, many Boomers both above and below that threshold have no plans of retiring anytime soon. The US government in August 2017 estimated that by 2024, older workers will account for a quarter of the workforce. (1)

Delaying retirement is understandable for several reasons. Some people continue working because they know they don’t have enough saved to continue their current lifestyle, even with social security benefits or part-time income. Others have an outsized incentive to continue, perhaps because each extra year they can work translates to large compound growth in a company 401(k). Still others simply enjoy their work and get a lot of satisfaction from it. And there are people who don’t want to quit because they’re reluctant to lose their employer-sponsored medical insurance.

Regardless of the reasons, putting retirement off for too long is a bad idea in general. There are two main reasons you shouldn’t depend on working forever, or at least well into golden years: the risk it poses to your health and the problems it can cause in your finances.

Health Risks

While your health might be great today—making it hard to imagine anything bad happening—the aging process starts increasing exponentially in your mid- to late-fifties. And expecting your current vitality to continue forever isn’t realistic. According to a 2017 study from the Employee Benefit Research Institute, 48% of retirees leave the workforce earlier than they had originally planned. (2)

In the above-cited US government study, Ken Scott, an epidemiologist with the Denver Public Health Department, told the AP, “Getting old—and the physical changes associated with it—could potentially make a workplace injury into a much more serious injury or a potentially fatal injury.”

On the subject of workplace safety, there’s good news and bad news. The good news is that an Associated Press analysis of federal statistics shows the rate of workplace fatalities fell by 22% from 2006 to 2015. But the tougher news, especially for the rising share of older workers, is that older people are dying on the job at a higher rate than workers overall. During that same range of years, workers aged 55 and older suffered fatal accidents at rates from 50 to 65% higher depending on the year considered. (2)

Also as mentioned above, there are people who hold onto employment because they don’t want to take on medical bills without the medical insurance coverage their company provides. Although this is understandable on one level, it’s actually an unrealistic way of handling a complex issue. Instead of thinking about employment as a permanent solution to healthcare issues and possibly exposing yourself to even worse risks, it’s smarter and healthier to take other steps to address ongoing health-care costs as you age. Here are some tips:

  • Get into a Health Savings Account. When combined with a high-deductible health insurance policy, you’ll see lower premiums and enjoy the advantage of saving up for medical expenses tax-free. These roll over every year and keep growing for future use, even into retirement.
     
  • If you aren’t already enrolled in your company’s health and wellness benefits, go do that today! You’ll be a lot healthier both in your career and in retirement if you make exercise a regular habit as soon as possible. And you’ll realize lower health-care costs too.
     
  • Take advantage of long-term disability insurance, especially if it’s offered as an employee benefit. This coverage typically replaces the equivalent of 50% to 70% of your income if you become disabled.

You Need a Plan Now

The other big reason to ditch the “work forever” career model is that it’s essentially a way of avoiding the inevitable. No one can predict the future. Despite all the best plans, the fact is life happens. You can’t foresee a cancer diagnosis, the loss of an income-producing family member, a forced career change, or unexpected dependents. Think about how much your life has changed over the past 20 years in unexpected ways. The best you can do for yourself today is to keep this in mind when planning the next 20.

The truth is that everyone will eventually retire. The thing you want to avoid is being forced to do so before you’ve taken the time and effort to plan it for yourself.

To get a sense of the possibilities, think about a few numbers. Let’s say the average American works about 40 years from age 25 to 65, and pulls in a median household income of $56,516, the latest figure from the US Census Bureau. (3) A quick calculation shows they’ll end up earning well over $2 million over their career.

That should be more than sufficient to make room for living expenses, emergencies and investment. And it should allow most people to retire in good health, and with plenty of years to enjoy family, hobbies or travel. The trouble comes in when life is dominated by debt, a lack of budgeting, and a failure to plan for the future.

You can and should retire with dignity. So don’t allow fear of the future to prevent you from planning for it.

You can improve your financial outlook today. SmartDollar participants, start by taking our wellness survey here. Once you have your score, review the Baby Step lessons that can get you moving in the right direction toward retirement. If you have trouble logging in, please visit our Help Center.

If your company does not offer SmartDollar as an employee benefit yet, read more about bringing SmartDollar to your organization here.