Think you'll work in retirement? Better plan now

Is working the new retirement? Certainly, many baby boomers plan to continue working in their retirement years, which raises the $64 trillion question: Will they be able to work as long as they want?

A recent poll from the Transamerica Center for Retirement Studies indicates that two-thirds of workers age 50-plus plan to work past age 65 or don't plan to retire at all. The median age at retirement they do report is 67.

But if the experience of the people surveyed is the same as current retirees, they won't be able to work that long. Current retirees surveyed by Transamerica reported a median retirement age of 62, and nearly two thirds (61 percent) retired before age 65.

Why exactly do workers retire before they planned? A recent study from the Boston College Center for Retirement Research (CRR) examined the reasons older workers retired early. Poor health is the most important reason, followed by layoffs or business closings. Then come family factors, such as the need to care for dependent parents or a spouse retiring sooner than planned. Changes in finances play a small role.

The CRR paper acknowledges that other factors can also affect a worker's decision to retire early, such as job satisfaction and the attraction of leisure time.

The CRR study also reports that the share of workers who change jobs in their 50s has increased since the early 1980s, with about half of all workers ages 58 to 62 no longer working for their age-50 employer. Interestingly, changing jobs prevents early retirement only if the new job is better, with either fewer hours, more pay or less stress than the prior job. If the new job is worse, workers are more likely to retire early.

Shocks happen

The CRR report shows that shocks that can cause early retirement are quite common:

  • More than one in three workers (39.9 percent) experienced a health shock
  • One in five (19.7 percent) had a spouse retire
  • One in 12 (8.3 percent) got laid off and didn't find new employment
  • One in 12 (7.9 percent) had a spouse in fair or poor health
  • One in 8 (12.1 percent) needed to care for a parent

When you add up the odds, chances are good you'll experience at least one of these shocks in your remaining working years.

Working in retirement requires planning

In an age of extended lifespans and meager retirement resources, working longer is a good way to maintain financial security in your later years. But just saying you'll work in your retirement years isn't a plan -- it's a hope. It's not a good idea to simply assume you can continue working indefinitely at your current rate of pay and can continue your current living expenses indefinitely.

If you're counting on working in your retirement years, here's a smart plan to help achieve your goal:

  • Be serious about maintaining your health, so you can continue to work.
  • Get your spouse on board to maintain his or her health as well, so you won't be forced to retire to take care of him or her.
  • Keep your skills up to date, particularly if you're in a middle-skill job.
  • Make sure you'll be physically or cognitively able to continue working at your current occupation. If not, be prepared to retrain or assume less demanding work that most likely is lower-paid.
  • Look for ways to decrease your living expenses, such as cutting your housing or commuting expenses. A day may come when you're no longer able to earn your current salary, so you'll want to be prepared to afford your life at that point.
  • Have a "plan B" in case you experience one of the above shocks.
  • Learn how to squeeze the most from your financial resources, so you can afford to assume lower-paying jobs if necessary and to plan for the day when you're no longer able to work at all.

While this might seem daunting, it's the price you pay for potentially living a long time. Considering the alternative, that should be an acceptable price.

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    Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops and authored Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck and Recession-Proof Your Retirement Years.