Working Longer

Tuesday, September 23, 2008

A major premise of is that it makes sense to stay active after "retirement." There are many reasons—physical and mental health, economics, and preventing the waste of experience and knowledge, among others.

In fact, we believe that "retirement" in the conventional sense—withdrawing to a passive, unengaged existence—is a bad thing.

One of the reasons for continuing to work described on is the need or desire to continue to make money—other than Social Security or a pension.

Now along comes a book whose main message is that many people will have to work longer than they thought they would, just to maintain their standard of living.

The book is Working Longer: The Solution to the Retirement Income Challenge, by Alicia H. Munnell and Steven A Sass (Brookings Institution Press.)

Munnell and Sass "note that the nation's retirement system, as embodied by Social Security and Medicare in the public sector and I.R.A.'s and 401(k) plans in the private sector, is contracting in its ability to replace workers' lost income—even as life expectancy is increasing."

"About 19 percent of men and 33 percent of women who survive to age 65 will live to age 90 or older and have to support themselves for almost 30 years," Munnell and Sass write. "The arithmetic does not work."

The authors cite numerous studies that turn up these very inconvenient truths:

  1. For people who retire at 65 today, it is estimated that Social Security will only provide the equivalent of 39 percent of their incomes after deductions for basic Medicare contributions.
  2. Those who plan to retire in 2030 can expect net benefits of only 30 percent of their incomes.
  3. In 1989, 66 percent of American employers provided post-retirement health care benefit programs. By 2006 that number had fallen to 35 percent.
  4. Americans do not save enough. In a 2004 Federal Reserve study, the theoretically possible or simulated amount of money owned by people aged 55 to 64 was $314,000. However, the actual average savings was only $60,000.

Munnell and Sass recommend that people postpone their retirements from the current average age of 63 to age 66. Four more years of work changes the ratio of retirement to working years from 1 to 2, meaning 20 years of retirement and 40 years of work, to almost 1 to 3, or 16 years of retirement and 44 years of work.

Working longer, the authors say, would delay the need for people to tap into their I.R.A.'s and 401(k)'s, increasing their total assets and the future income they can produce. It would also maximize the benefits of Social Security, which are about one-third higher for recipients who are 66 than for those who are 62.

The authors raise other important issues, which we will discuss in subsequent blogs: whether older workers will be healthy enough to continue to work, whether they will want to, and whether employers will be willing to employ them.

If you're interested in ordering the book, please click here. The link will take you to the resources section of, and Working Longer is the first book listed.

- Lee Callaway of Redwood City, CA, has reinvented himself several times, including a transition from corporate executive to consultant, two trips back to graduate school and, most recently, as the founder of His driving force is staying active, discovering and trying new things, and continually searching for new challenges. 

posted at 09:29:27 AM

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