There was a time when someone would circle a date on their calendar to mark when they would stop working altogether and begin retirement.
Times have changed.
Today it seems retirement is better defined as a transitional period rather than a singular point in time. Many workers slowly adjust to retired life by scaling down the number of hours they work, shifting responsibilities or changing what they do entirely. In doing so, they are able to extend the numbers of years in the workforce and increase their retirement savings.
New LIMRA Secure Retirement Institute (LIMRA SRI) research finds pre-retirees and retirees are almost evenly aligned on how they anticipate entering into retirement: 56% said they plan to stop working entirely, 17% plan to gradually reduce their hours before stopping and 27% plan to work part-time with no plan to stop working.
In actuality, among recent retirees 64% stopped working all at once, 17% indeed gradually reduced their hours and just 19% continued to work part-time.
In looking at the gap between the 56% who planned to stop working and the 64% who actually did, another recent poll sheds some light. The poll, released in July from The Associated Press-NORC Center for Public Affairs Research, found a disconnect between individuals’ retirement plans and the realities of aging in the workforce. Even though nearly one-quarter of Americans say they never plan to retire, illness, injury, layoffs and caregiving responsibilities often force older workers to leave their jobs sooner than they’d like.
The AP-NORC poll found 23% of workers, including nearly two in 10 of those over 50, don’t expect to stop working, while roughly another quarter of Americans say they will continue working beyond their 65th birthday.
According to government data, about one in five people 65 and older were working or actively looking for a job in June.
Women more likely to phase into retirement
The LIMRA SRI study found women are more likely to phase into retirement than men. A quarter of female recent retirees phased into retirement versus 16% of male recent retirees.
Oftentimes, men may be less likely to phase into retirement because it is more difficult to do so with their pre-retirement job functions. For instance, 23% of men worked in managerial job functions before retirement compared with 13% of women.
For the 1 in 5 retirees who continue to work, there are multiple reasons that motivate them, including:
- staying intellectually engaged
- money for discretionary spending
- staying physically active
- staying socially engaged
- enjoying their work
LIMRA SRI finds the top three primary reasons for continuing to work among working recent retirees are for spending money (32%), enjoying their work (19%) and to stay intellectually engaged (14%).
Employment and lifestyle changes can significantly impact consumers’ income and expenses. It is important for financial advisors to have a clear picture of this evolving landscape to help retirees develop an appropriate financial plan.
For employers, it is important to adapt to the preferences of older workers as more retirees continue to work past typical retirement age. More flexible benefits programs may become necessary to meet the divergent needs of age-diverse workers.
Benefits providers should consider ways to help employers adapt their offerings to improve recruitment and retention, optimize resources, and understand the impact changing demographics can have on benefits and actuarial assumptions.
With a 50-year record low unemployment rate, employers who make it easy for retirees to work for them may benefit from their experience and expertise.
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
