Many Americans plan to work longer to cover their retirement savings shortfall. But it may be a pipe dream.
According to a new survey by the nonprofit Transamerica Center for Retirement Studies (TCRS) 55% of workers plan to work after they retire. That includes almost 20% who plan to work full time and more than a third who plan to toil part time. More eye-opening: a staggering 15% of all workers expect their primary source of retirement income to come from working,
TCRS, in collaboration with the Transamerica Institute, polled 5,725 workers over age 18 who worked in a for-profit company employing one or more employees between November 8 and December 13, 2022.
Five years ago, 66% of baby boomer workers, for example, expected to retire after age 65, compared with 71% in late 2022, while 54% planned to work in retirement (compared with 55% in 2022).
Total household retirement savings have increased—from $164,000 five years ago to $289,000 in 2022— but "for many, their savings may be inadequate for a retirement that could last more than 20 years," Catherine Collinson, CEO and president of Transamerica Institute and TCRS, told Yahoo Finance.
The outlook is bleak for a hefty share of workers. Most workers (53%) say they simply don’t have enough income to save for retirement, according to the researchers. Those surveyed expect a range of sources of retirement income, including savings from 401(k) to Social Security. But more than a third—36%—said they’re planning on working to make ends meet.
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While working longer is all well and good, these folks may not want to bank on it.
"In theory, envisioning working longer and retiring later sounds like an ideal solution to not having enough retirement savings," Collinson said. "However, it can be very difficult to achieve in practice, especially if you're not taking good care of your health and keeping your job skills up to date."
And, put simply, many workers aren’t doing the work to ensure they can, well, keep working. Fewer than six in 10 workers say they’re staying healthy so they can continue working (58%), and less than half (49%) are keeping their job skills sharp. Even fewer workers are taking classes to learn new skills (24%), and earning a new degree, certification, or professional designation (17%).
What’s spurring the work until you drop thing? The lack of confidence in the retirement system from concerns about how much they have saved to uncertainty about Social Security and Medicare to not understanding where to turn for financial advice.
In fact, retirement confidence in the US has declined by the largest margin since the Great Recession, according to the latest annual survey by the Employee Benefit Research Institute (EBRI) and Greenwald Research. Just 64% of workers are very or somewhat confident they’ll have enough money to live comfortably in retirement, down sharply from 73% in 2022.
That large of a drop in retirement confidence hasn’t happened since 2007 to 2008 and 2008 to 2009 when the economy was in a severe recession, said Craig Copeland, director of Wealth Benefits Research at EBRI, a nonpartisan research institute in Washington, D.C., and chief researcher for the group's 33rd annual Retirement Confidence Survey.
Workers ‘across generations’ planning to work in retirement
The notion of continuing to earn a paycheck in retirement is not just one embraced by a handful of not ready-to-pack-it-in folks. Workers across generations plan to continue working in retirement, according to the Transamerica survey. More than half of Generation Zers, 56% of millennials, 54% of Gen Xers, and 55% of baby boomers all plan to work in their golden years.
Here’s some data that shows why: Workers planning to work past age 65 and/or in retirement—or are already doing so—cite both healthy-aging (80%) and financial reasons (78%). Other frequently cited considerations are "concerned that Social Security will be less than expected" (33%), "can’t afford to retire" (31%), and "need health benefits" (27%).
'Employers just aren't getting it'
The truth is continuing to earn a paycheck of some sort after stepping away from a primary career is a smart plan even if you have saved enough to cover your living expenses in retirement. It can be a financial safety net and makes it easier to stave off tapping into retirement savings, so the funds can continue to grow. And it can make it easier to delay Social Security benefits. If you choose to wait to tap your benefits until age 70, you earn delayed retirement credits, which come to roughly an 8% per year annual increase in your benefit for each year between your full retirement age until you hit 70 when the credits stop accruing.
There are also psychological and health reasons to take into account, including keeping involved with a social network and feeling relevant.
The problem is that life often comes at you with the unexpected–from health issues to caring for family members like a spouse–that puts the kibosh on it.
Another glaring glitch: A sizable 17% of workers say their employers are not age-friendly, per Transamerica. Only four in ten (41%) said their employer offers retirement transition assistance such as flexible work schedules and arrangements (23%). And a tiny 21% allow employees to trim work hours and shift from full-time to part-time, 18% enable workers to shift to positions that are less stressful or demanding.
That’s going to be a problem for the more than four in ten of workers who envision transitioning into retirement either by reducing their hours with more time to enjoy life (26%) or working in a different capacity that is either less demanding and/or brings greater personal satisfaction (18%), according to Transamerica.
"It's exciting to see people setting their sights on longer working lives and recognizing the potential for living longer than earlier generations," Collinson said. "But by and large, many employers just aren't getting it yet…many employers’ business practices are still aligned with what is now an outdated mindset that work and retirement are mutually exclusive."
In the end, the worker shortage may provide more job opportunities. "A steep drop in fertility rates has eviscerated working-age populations in leading economies, causing employers to seek out new sources of labor, including older workers," Bradley Schurman, a demographic strategist and the author of The Super Age, told Yahoo Finance. "And that’s pushing some leading employers to devise new retention and recruitment strategies."
Kerry Hannon is a Senior Reporter and Columnist at Yahoo Finance. She is a workplace futurist, a career and retirement strategist and the author of 14 books, including "In Control at 50+: How to Succeed in The New World of Work" and "Never Too Old To Get Rich." Follow her on Twitter @kerryhannon.
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