San Francisco — Long-lived baby boomers are going to transform the idea of retirement, working late into their golden years, right?
Certainly statistics show more older Americans are opting to work later in life, but there remains a hefty portion of older people who consistently retire early, some economists are warning.
Whether it's because of health problems, a desire to slow down, or getting laid-off and being unable to find new work, sometimes the intention to work long into one's later years goes awry.
In a recent study based on 2004 data, the employment rate falls to 51 percent among 61-year-old women, from the peak of 76 percent among women who are 46 years old, said economist Elise Gould at the Economic Policy Institute, a liberal think-tank.
By age 65, 26 percent of women that age are working.
Among men who are 61 years old, about 61 percent work, compared with 89 percent of those at the peak employment age of 39. By age 65, 36 percent of men are working.
Gould's data snapshot is an attempt to show that a portion of older Americans stop working before being eligible even for partial Social Security benefits at age 62, and that increasing the eligibility age for full benefits doesn't remove the barriers that prevent some older Americans from working.
Policymakers study report
Gould's report is in response to policymakers on Capitol Hill, some of whom suggest increasing the age at which Americans are eligible to receive full Social Security benefits as a solution to the program's projected funding gap.
"Raising the age doesn't help older Americans get jobs," Gould said.
"If we're going to insist on people working longer because they can't get Social Security, we have to think there are going to be that many more jobs in the economy to be able to employ people of all ages."
Others said workplace and policy changes were needed to keep older Americans in the work force.
In need of jobs
Upping the Social Security age "will help the Social Security problem, but it won't help the problem of real people," said Alicia Munnell, director of the Center for Retirement Research at Boston College, adding that in general she's in favor of policies encouraging older workers to remain in the work force.
She cited the Employee Benefit Research Institute, a nonpartisan research group, which for about a decade has surveyed workers and retirees on retirement issues.
On average, those surveyed retire at age 62. About 40 percent of retirees say they retired earlier than intended, a consistent finding for years, according to the EBRI survey.
"Every year they ask people when they're going to retire and everyone says 65, and when you ask when did they retire and it's 62. People have had plans for a long time to work longer, and they've not come to pass," Munnell said.
"We need to have a policy to change real work patterns and then maybe we can discuss raising the normal retirement age under Social Security," she said.
Some of those early retirements are due to health problems, but another reason is older workers often want to step down from a hectic, time-consuming job yet hope to continue working at a slower-paced job.
"There's still this issue of wanting to slow down, and it's very hard for people to do that in their current employment and hard for them to leave current employment and find a new job," Munnell said.
"Who knows whether it's discrimination or not, but older people look expensive and in some cases are expensive. People are skeptical about hiring older workers," she said.
Said Gould, of the EPI: "Once people become unemployed, these older age groups are much more likely to fall into the ranks of the long-term unemployed. It can take them a much longer time to find jobs."
Certainly, another reason people retire at 62 is because of the early Social Security benefit available at that age.
"A lot of people don't have very nice jobs and Social Security offers early retirement benefits at age 62. As soon as they see money that looks sufficient to live on, the tendency is to grab it," Munnell said.
Change leaves 'no choice'
Some say increasing that eligibility age for partial benefits could help keep older Americans in the workplace.
"If as a society we want individuals to continue working longer, then probably the only change in Social Security policy that can definitively do that is to increase the age of first eligibility," said Dallas Salisbury, president of EBRI. "The data suggests that large numbers of people would work longer because they basically would have no choice."
In 1983, Congress mandated that Americans born after 1959 collect their full Social Security benefits starting at age 67, versus age 65 for those born in 1937 or earlier.
Now another age increase is being considered by some as a way to ease the projected Social Security shortfall. Raising the age leads to reduced benefits by paying out over a shorter period of time.
"This is a fundamental choice that policy-makers are facing," said Bruce Schobel, chairman of the retirement principles task force at the American Academy of Actuaries, and a practicing actuary. In 1983, Schobel served on the National Commission on Social Security Reform, and he worked at the House Ways and Means Committee at the time Congress enacted the age increase.
"If they don't want to raise taxes, then they're going to have to cut benefits, and if they cut benefits, workers are going to either have to lower their standard of living in retirement or they're going to have to save more or work longer or something. We don't really know what's going to happen," Schobel said.
Another member of the American Academy of Actuaries recently testified at a congressional hearing that increasing the age for full benefits would help cut the Social Security shortfall, though Schobel said the Academy does not advocate one Social Security reform over another.
Meanwhile, the American Institute of Certified Public Accountants, a nonpartisan trade association, noted in a recent analysis of various Social Security reform proposals that if the eligibility age is increased, "financial soundness would improve at the cost of higher poverty levels" among older Americans.
Of course, even under current law, if people continue to retire at 62, they'll get smaller benefits than older retirees who quit working at 62. That's because of the 1983 changes, under which someone born after 1960 who retires at age 62 will receive just 70 percent of full benefits, while someone born before 1938 who retires at age 62 gets 80 percent, Schobel said.
"Maybe the smaller benefit will motivate them to retire later," he said. Or, "maybe just the demographic changes in the work force may provide incentives to retire later. It could be that employers will start trying to retain older workers instead of trying to get them to retire," Schobel said.
"A lot of things may change as a result of the retirement of the baby boom generation. They're going to leave a lot of holes in the labor force that will have to be filled by somebody."