Why Working Till Whenever Is a Risky Retirement Strategy

Cleo Parker had a simple plan before retiring: She would work well into her 60s as a marketing analyst in the automotive business. But recently, she has been searching for a Plan B.

In 2006, just as she was about to turn 50, Ms. Parker’s longtime marketing job with a Detroit-area advertising agency was eliminated. For the next decade, she worked a series of short-term-contract and full-time positions — many in the volatile auto industry, which has reduced employment levels drastically since the 2008 financial crisis. Ms. Parker’s last full-time job, as a marketing analyst for a pet supply retail chain, evaporated in 2018.

Ms. Parker has since interviewed for more than 30 positions. At age 62, she often finds herself chasing jobs for which she is overqualified and that pay far less than what she had been earning.

“First, you have to deal with persuading people you are O.K. with a salary level at or below your last position,” she said. Age discrimination also has been a barrier, she suspects: “I feel they often have a vision of an eager person younger than themselves walking into the job, and while I tend to be very enthusiastic, I am not younger than anyone I’ve interviewed with in many years.”

Ms. Parker’s story is a cautionary tale for anyone planning to postpone retirement and work indefinitely: It’s a fine aspiration, but it’s best to have a backup plan.

Many Americans understand that working longer can be a good way to improve retirement security. According to the Employee Benefit Research Institute, 33 percent of workers expect to retire between the ages of 65 and 69, and 34 percent at 70 or beyond, or not at all.

Yet a recent study by the Center for Retirement Research at Boston College found that 37 percent of workers retired earlier than planned — and that the odds of success fell as the goal became more ambitious. In that study, among the 21 percent of workers who said they intended to work to age 66 or later, 55 percent failed to reach that target.

The most common causes for unexpected early retirement are health problems and job loss, said Geoff Sanzenbacher, associate director of research at the center. He was quick to note, however, that the study, based on data from the long-running University of Michigan Health and Retirement Study, offers clear reasons for unplanned early retirement only in about one-quarter of cases.

Other reasons, Mr. Sanzenbacher suspects, are more difficult to measure. The pull of leisure activities and time with family are factors, he thinks, along with possible age discrimination. But the quality of work also matters.

“Do you feel motivated to go to work, and feel like you are accomplishing something?” Mr. Sanzenbacher said. “That can wear on older people nearing retirement faster than they might think.”

Labor-force participation rates for workers 62 and older have been rising over the past 25 years, according to research by Richard W. Johnson, director of the program on retirement policy at the Urban Institute. But the increases have occurred mostly among better educated workers.

“Participation rates have increased about three times as fast for college grads than high school dropouts,” Mr. Johnson said, “mainly because college grads tend to be healthier, they don’t usually work at physically demanding jobs, and employers value them.”

Working longer makes it easier to delay your Social Security benefit claim, increasing monthly benefit amounts through delayed retirement credits. Working longer can also mean more years of saving for retirement and fewer years relying on savings in retirement.

But counting on working longer to make a retirement plan work is fraught with risk — even during times when the labor market is healthy. The unemployment rate for workers 55 and older in April was just 2.6 percent, according to the Department of Labor — a full percentage point lower than the overall unemployment rate. But long-term unemployment is higher for older workers: 26.6 percent had been out of work 27 weeks or more last month, compared with 22.2 percent of all workers.

“Yes, the unemployment rate is low, but if you get laid off, the chances of ever really recovering are not very good,” said Marc Miller, a career coach in Austin, Tex., who specializes in advising older workers on career shifts.

Even those who do find new jobs don’t return to their earlier income levels, Mr. Johnson said. “You’d be lucky to get half as much as you were making — it’s a big hit at any age, but it’s so much worse when you’re older because you have so little time to recoup those losses. There’s not much time to reset your retirement planning before you stop working.”

Ms. Parker and her husband, Mike, a technician specializing in small engine repair who also lost his job late last year, had hoped to retire on their retirement account savings and Social Security, but the couple has been forced to tap those savings sooner than expected, along with some money Ms. Parker inherited from her mother. Some of the I.R.A. drawdowns occurred before she turned age 59½, but those came from a Roth account, so she was able to avoid paying early withdrawal penalties.

Ms. Parker thinks her savings will last until she turns 80, but isn’t completely sure, she said.

“This is a topic that makes me really uncomfortable, so I am not studying when we start circling the drain on a very frequent basis,” she said.

At this point, Ms. Parker is seeking full-time work and hoping to postpone filing for Social Security until her full retirement age of 66. She expects the couple’s combined Social Security benefit to provide $4,000 in monthly income.

She wants to work as long as possible, partly to support her lifelong passion for dogs — she has four bull terriers and participates in dog shows and other competitive events.

“I want to find work I enjoy and that would give me the time to show my dogs,” she said.

These days, Ms. Parker is working to develop a new career offering her marketing skills to dog-related businesses. She started a blog about dog marketing and is hoping to make a living working in that business. But she doesn’t expect her income to come close to the six figures she made earlier in her career.

Sporadic income can be especially damaging to household finances. Elizabeth White, an international development expert specializing in sub-Saharan Africa, was making $200,000 a year as a consultant when the economic crisis hit in 2008. Her consulting income disappeared, and she turned to a mix of consulting gigs, writing and speaking engagements.

“You have these big income gaps in between consulting assignments,” she said. “By the time you get something, you owe everybody and your mother; you’re in the hole again. You get, and you lose.”

A 2016 essay that Ms. White wrote for PBS NextAvenue about her employment crisis drew widespread attention on social media, ultimately opening the door to publication of her recent book, “55, Underemployed and Faking Normal.” A TED talk that she gave on the topic in 2017 has been viewed more than 1.5 million times.

Now 65, Ms. White has burned through her retirement savings, but owns her home in Washington with a low-rate mortgage that she is close to paying off. She is holding off on filing for Social Security until she reaches the full retirement age of 66 this year.

Planning to work longer still makes sense, experts say; if anything, too many workers retire at less-than-optimal ages. Mr. Sanzenbacher’s research found that the most popular planned retirement ages are 62 and 65 — the first years of eligibility for Social Security and Medicare, respectively.

“Neither of those ages maximizes an individual’s Social Security benefit, and claiming at 62 is far too early for most people,” he said.

At the same time, Mr. Sanzenbacher added, it is crucial to understand the odds of hitting your target date. He urges workers to make an honest assessment of their health and how that might affect the plan.

“When you make a plan, think realistically about your health,” he said. “If you are planning to work to 65 and you already have health problems in your late 50s, that plan may not work.”

Mr. Miller, the career coach, urges anyone hoping to work into the 60s or 70s to make a realistic assessment of future job risk well ahead of that time.

“If you think you are safe, then you are probably smoking something, and you are inhaling,” he said. “If you want to work through your 60s and even into your 70s, you need to do the planning now.”

Even that may not be enough protection for your plan, so what about that Plan B?

Said Mr. Johnson: “You want to save as much as you can while you’re still working.”

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