Baby boomers with paltry 401(k)s and IRAs are vowing to work forever, or at least, past traditional retirement age. But a new report says a crowded labor market will limit their ability to amass the savings they need even if they do work long past 65.
The problem, researchers say, is that millions of boomers will try to crowd into the job market during those later years.
The tremendous number of people competing for full-time and part-time jobs will give employers the leeway to keep pay down. So boomers trying to make a last-ditch effort to fill up their retirement savings accounts may have to work longer than they think to generate the dollars they want.
“Boomers delaying retirement will continue to reduce their wages in old age,” according to research co-authored by Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis at The New School in New York. And while that could mean boomers continue to work for less than they would want, it also won’t be good for younger workers.
“Boomers will cause the labor supply of older workers (those who are 55 to 74 years old) to increase relative to the labor supply of prime-age and younger workers,” according to a related report, written by Ghilarducci, along with research associates Michael Papadopoulos and Siavash Radpour. If employers end up using older workers instead of younger workers, this could also lower wages for younger workers or slow down their wage growth, the researchers say.
This could be “vitally important” now, they note, because there has never been a time when so many older people have been working.
Gallup polling has found that 74 percent of adults now plan to work past retirement age – 63 percent part time and 11 percent full time. In contrast, in 1995, only 14 percent said they’d work after 65.
Most people told Gallup they want to work, rather than having to work. But if they are honest with themselves and take a thoughtful look at their savings, close to half of people nearing retirement age would see that they should be working. Only 57 percent of people between 55 and 64 have enough savings to last through retirement, according to an Employee Benefit Research Institute analysis.
The Bureau of Labor Statistics has estimated that 7.2 million people over 55 will be in the labor force in 2024. That group of older workers is expected to be the fastest growing part of the labor force.
The desire to work past retirement age has been edging up since the 1980s, and bumped up after the 2008 recession. That recession hit near-retirees both economically and emotionally. People over 55, who lost jobs, were unemployed for much longer than younger workers and took a 23 percent pay cut to go back to work, according to the Urban Institute. Some spent down retirement savings while looking for work, and lower pay left them less able to save.
In addition, as the stock market crash destroyed half the value of stock market investments, nervous near-retirees pulled out money in a panic, and didn’t benefit from gains of more than 200 percent since 2009.
Apart from the feeling of vulnerability the recession left behind, there has been an increase in working later into life over the last couple of decades due to changes in typical sources of retirement money. Fewer new retirees will have guaranteed pensions like those that helped older retirees. And the age to qualify for full Social Security benefits has climbed. Although people can retire as early as 62 and get some Social Security benefits, full retirement age is 66 and will soon become 67. A person who delays taking Social Security until age 70 gets benefits 76 percent higher than a person claiming Social Security at age 62.
Retirement researchers also say more people now have college educations and white-collar jobs, which enable them to work longer than people in physically demanding blue-collar jobs. However, even with the intent to work longer, many will fail to carry out their plan. Although baby boomers assume they will stay youthful and work for years, even those with desk jobs could end up with health problems or lose jobs in layoffs. In a review of government data, the Center for Retirement Research at Boston College found that 41 percent of American workers retired earlier than they had planned.
So vowing to work forever tends not to be a solid plan. It’s one reason why working young baby boomers should beef up their retirement savings now, while they can, and why young workers – even if struggling with disappointing paychecks – should save 10 percent of their pay.