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 The Case Against Retirement

The Age of Retirement is over, and a new social revolution is afoot: A majority of boomers expect to earn a paycheck in retirement, and that's a good thing.


Ah, retirement!

Before the 1950s it was something only the wealthy could afford to do. Everyone else needed an income, and most folks struggled to get by in the industrial economy as their faculties deteriorated. Back in the days before 401k's -- let alone Social Security -- older people faced the kind of pressures portrayed by filmmaker D.W. Griffith in his melodramatic 1911 silent film "What Shall We Do With Our Old?" It's a sad tale of the setbacks endured by an elderly couple, the wife ailing, the husband tossed off the assembly line to make way for a younger worker.

Griffith was one of many social activists calling for a social insurance system to provide an income for the elderly. The social reformist dream became reality with the 1935 Social Security Act, the spread of the corporate defined benefit pension plan and Medicare in 1965. For most workers the last stage of life became a time of leisure, recreation and enjoyment.

The Age of Retirement was one of America's most successful social reforms ever. But that era is over. A new vision of old age is emerging from the trauma of the credit crunch and the Great Recession: Forget retirement. Keep working.

Surveys show that a majority of baby boomers say they want to work during their golden years. They're going to get their wish. The key question is no longer "How early can I retire?" It's "Why retire?"

Of course, like all tectonic social and economic shifts, the trend isn't new. It has been building for the past three decades with the move away from traditional pensions, with their involuntary contributions and steady payout, for 401k-type plans, with their voluntary contributions and uncertain returns.

We're also living longer. That's good news, but it does mean that to maintain their standard of living the elderly have to either earn a paycheck longer or save more -- a lot more.

  • Calculator: Are you saving enough for retirement?

For workers nearing their retirement years, the median balance on 401k's and IRAs combined was a mere $78,000 in 2007. And the stock market reached its all-time peak that year! But the Great Recession has devastated portfolios since then, a stark reminder to millions of near-retirees that they haven't saved enough to fund a good retirement.

Indeed, taking into account the declines in financial assets and housing, the National Retirement Risk Index as of mid-2009 signals that 51% of households are at risk at age 65 of not having enough retirement income to maintain their pre-retirement standard of living. That's up from 44% in 2007 and 43% in 2004, according to the index's creator, the Center for Retirement Research at Boston College.

Those are hardly heartening percentages, and the situation seems even worse when the U.S. unemployment rate is at 10.2%, according to the Labor Department's October survey. The jobless rate for workers 55 and older is around 7%.

But a look at longer-term trends is encouraging. An aging work force is living longer and is less disabled than previous generations. After all, average life expectancy in 1935, when Social Security became law, was 61 years. It's now 78.

A tweak may have to be made to the Beatles song "When I'm Sixty-Four":

When I get older losing my hair,

Many years from now,

Will you still be sending me a valentine,

Birthday greetings, bottle of wine . . .

If I'm at work till quarter to 10

Would you lock the door? . . .

(It should be noted that the man who sings the lead vocal on the original tune, Sir Paul McCartney, continues to enjoy a productive career three years beyond his 64th birthday.)

Of course, older workers probably won't be "digging the weeds," to mine the Beatles vein one last time. An economy dominated by services, information industries and knowledge businesses is far easier to labor in than one where the commanding heights are full of factories, mines and farms.

The prospect of longer employment suggests more people will choose to alternate the rhythm of their lives, sometimes working intensely and at others exploring other opportunities.

Nevertheless, it's a social and economic revolution. Take those surveys that show a majority of boomers expect to earn a paycheck in retirement. Only about a third in the past actually worked for pay following retirement.

Yet companies are far from eager to fill their ranks with an aging work force. The same energy and marketing savvy that created the postwar retirement of mass tourism and leisure will need to be expended on building satisfying careers and job opportunities for a highly experienced but graying and less robust work force.

That said, the pressure to accommodate older workers will be there, much as the demand for old-age insurance was growing around the time D.W. Griffith made his movie. The reason is that the financial impact of working even a few years longer on the average older worker is dramatic.

A paycheck has a greater effect on living standards than increasing retirement contributions from 15% of that paycheck to 25%, for example. Your savings continue to compound, and your Social Security benefit grows. The same dynamic holds with working part-time.

"You don't have to pay for expenses out of savings," says Christine Fahlund, a senior financial planner at T. Rowe Price. "You meet them with your paycheck.

Keep On Workin'

Many baby boomers plan to keep working and earning money during their retirement years, but will alternate between periods of work and leisure, according to a survey by Merrill Lynch.

Reinventing Retirement
The New Retirement Survey builds on the conventional wisdom that many baby boomers are not interested in pursuing a traditional retirement of leisure.

"Baby boomers fundamentally will reinvent retirement,” said James P. Gorman, president of the Merrill Lynch Global Private Client Group, in a news release about the survey. “With (baby) boomers living longer and remaining engaged and employed beyond age 65, many of the traditional financial assumptions regarding retirement need to be reexamined.”

Highlights of the Baby Boomer Survey
Created with guidance from gerontologist and author Ken Dychtwald, Ph.D., The New Retirement Survey offers a preview of the different lifestyles, workstyles and recreation activities that baby boomers envision for their future.

Here are highlights of the survey, from a news release by Merrill Lynch:

  • The new retirement "turning point." While 76% of baby boomers intend to keep working and earning in retirement, on average they expect to "retire" from their current job/career at around age 64, and then launch into an entirely new job or career.

  • Taking advantage of their "longevity bonus," baby boomers will create a whole new life stage. Since the time that Social Security established the "normal" retirement age at 65, life expectancy for a 65-year-old has increased by over seven years and continues to lengthen.

    As a result of living longer, baby boomers plan to be "younger" longer and to work longer.

    Most baby boomers who responded to the survey (65%) will stop working for pay and retire in the traditional sense at some point. However, that phase is more likely to begin in the late 60's than at age 60 or 65.