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8 reasons older people are working longer

Many older Americans keep working because they can. They also have strong financial incentives.

By MSN Money Partner Aug 12, 2011 7:45AM

This post comes from Alicia Munnell at partner site SmartMoney.


Since working longer is the key to a secure retirement for the vast majority of older Americans, it's useful to take a look at labor force trends for men under and over 65 for the last century or so. (The focus is on men because women's patterns reflect both their increasing labor force participation over time as well as their shifting retirement behavior.)


The notion of retirement as a distinct and extended stage of life is a recent innovation. Up to the end of the 19th century, people generally worked as long as they could. At the end of the 19th century, an unexpected and substantial stream of income appeared in the form of old-age pensions for Civil War veterans that allowed people to stop working. For a variety of reasons, work rates did not return to their previous levels as the veterans died off.


The next big decline in the work rates of older people occurred after World War II. One obvious factor was the availability of Social Security benefits and the expansion of employer pensions. The introduction of Medicare in 1965 and the sharp increase in Social Security benefits in 1972 probably led to the final leg of the decline in workforce activity of older men. And because benefits were available at 62, Social Security may also explain part of the decline in labor force activity for men 55-64. Post continues after video.

The downward trajectory stopped around 1990, and since then the labor force participation of men both 55-64 and 65 and over has gradually increased. Many factors help explain this turnaround:

  • Social Security. Changes to Social Security made work more attractive relative to retirement. The liberalization and, for some, the elimination of the earnings test removed what many saw as an impediment to continued work. The delayed retirement credit, which increases monthly benefits for each year that claiming is delayed between the full retirement age and 70, has also improved incentives to keep working.
  • Pension type. The shift from defined benefit to 401k plans eliminated built-in incentives to retire. Studies show that workers covered by 401k plans retire a year or two later on average than similarly situated workers covered by a defined benefit plan. (How much money will your 401k provide? Try MSN Money's calculator.) 
  • Education. People with more education work longer than those with less. Over the last 30 years education levels have increased significantly, and the movement of large numbers of men up the educational ladder helps explain the increase in participation rates of older men.
  • Improved health and longevity. Life expectancy for men at 65 has increased about 3.5 years since 1980, and much of the evidence suggests that people are healthier as well. The correlation between health and labor force activity is very strong.
  • Less physically demanding jobs. With the shift away from manufacturing, jobs now involve more knowledge-based activities, which put less strain on older bodies.
  • Joint decision-making. More women are working, wives on average are three years younger than their husband, and husbands and wives like to coordinate their retirement. If wives wait until age 62 to retire so that they qualify for Social Security, that pattern would push husbands' retirement age toward 65.
  • Decline of retiree health insurance. Combine the decline of employer-provided retiree health insurance with the rapid rise in health care costs, and workers have a strong incentive to keep working and maintain their employer's health coverage until they qualify for Medicare at 65.
  • Non-pecuniary factors. Older workers tend to be among the more educated, the healthiest, and the wealthiest. Their wages are lower than those earned by their younger counterparts and lower than their own past earnings. This pattern suggests that money may not be the only motivator.

Will the increase in labor force participation continue? The fact that all the incentives associated with the recent reversal remain in place argues for "yes." But there are risks -- the move away from career employment, the availability of Social Security at 62, and employer resistance to part-time employment. More on the risks later.


More on SmartMoney and MSN Money:

Sep 14, 2011 12:13PM
I'm a 63 yr. old ex professional carpenter, and I'm still working all I can get because I HAVE to, not 'cause I want to. I'm old enough to remember the middle class dream of a nice house, kids, dog, and retire with a pension at 65. Thanks to the financial wizards on Wall St., I can't retire till I'm near 75, if even then. Great huh? The greedy sh*t heads who sold all those crap investment packages as AAA rated around are the ones to blame for this mess, the worst recession since the crash of the 1030's. And who suffers, we, the working classes, not the guys with 9 million dollar severance packages. Goldman-Sacks, B of A, Chase, AIG, etc. get bailed out and richer, and I can't make the same wage that I did in the mid '70's. I'm disgusted, angry, and mad at the politicians that won't regulate the banking industry, and would like to pee on the Wall St. A-holes that killed my life style. They tell you work hard and you'll make out well, B.S. I say. As long as big money rules Washington, we don't stand a chance. The rules for campaign money are skewed tward the big corporations and rich contributors, and the little guy doesn't stand a chance. Until we actually have a voice in the White House and Congress, this country is in a death spiral.
Sep 14, 2011 2:43AM

You want the simple truth about why alot of older Americans are working longer? We can't afford to retire.. some of us never will. Many of us live paycheck to paycheck and have for yrs. Not all of us have the adfvantage of being in a position to save. If I have to choose between utilities and food or putting money into savings, guess what wins out? I live very modestly, and barely hang on, and I know several people who aren't even doing as good as me.


 Stop writing articles about retirement and everyone is well off.. you seriously  need a reality check. Write articles about how to live well on $400 a week... Oh and then try to actually live on $400 a week, pay all your bills, buy everything you need to live.. gas groceries clothes etc .. in today's economy. Welcome to my world!!!

Sep 13, 2011 8:17PM

Seriously?  Someone wrote an article about this?  Older people working longer?  The answer is simple and one everyone has heard but this writer apparently.....IT'S THE ECONOMY, STUPID!!!

what a load of crap.  older people are working because they have to, they are using all their retirement to live on right now and have to work.  i'll be working until i drop over dead because of losing jobs and being discrminated against due to my age and having to use all my savings and retirement to live on.  no one can afford to stop working now except for the people that stole all the money from all the people in this country.    
Sep 13, 2011 10:12PM
With the rampant unemployment, many of us baby boomers are living off the savings that we'd hoped to use for retirement.  Unfortunately, I paid for my child's college education-only to see him struggle to find a decent job.  I doubt he will be able to support me when I get older.  One thing no one ever told me about was age discrimination-getting a job when you're over 50 is difficult.  You may have experience and skills, but companies are worried about health insurance and paid sick time. It's only natural for humans to slow down as they age, but in this stupid "50 is the new 30" world, slowing down is not an option.
Sep 14, 2011 7:31AM

Most of the older workers at my former company were laid off...

Mainly because they had more years of  service, and received bigger pay checks...?

Might have something to do with the new company dress code...?

No Gray Hair....

Sep 13, 2011 9:54PM

The reason a lot of seniors are working is because of all the changes made to Social

Security. First off the Government has raised the age for full retirement so many times

that it will soon exceed the average life expectancy. Then when they do retire they have to

pay health insurance that can take a large portion of their monthly check. Retirement

isn't what it used to be and most Americans are forced to work until death because they

cannot afford  to retire.


They worked hard all of their lives, many invested and lost thousands in their 401Ks,

Social Security is a failure so what else can they do?    

Sep 14, 2011 1:23AM

Forgot a couple. Kids are not working and living at home. 401's and retirement packages were robbed. Those who have not been laid off are trying to make up for what business and our government has blundered. Those who were laid off cannot find job with "livable wages". Age discrimination is alive and well.

You can refer to all the fluff you want when writing these articles but the reality is, Global economics and what our political parties both endorsed back in the early 80's. Workforce 2000. JTPA and WIA were all smoke screens designed to fool Americans into think that global economics was a wonderful thing and that we who were effected would be re-trained for other work. Guys and gals, it goes on and on and on like the ever ready rabbit. We're FCKD.

Sep 13, 2011 10:18PM
Many comments are not entirely correct or incorrect as retirement represents different things to virtually everyone. I worked until the age of 68 1/2, as I enjoyed the work, my fellow workers and an  attractive salary. The last 3 years of employment I collected my full SS benefit and full salary which helped to pay off a mortgage and all other debt. I do not agree with the notion that the older workers are "stealing" jobs from younger workers. Having worked in the engineering / construction business for more than 25 years, not too many young workers (more intelligent in many cases) are qualified for senior positions simply because the years of experience teach valuable lessons learned only through years of experience.   
Sep 14, 2011 10:28AM

Survival in this ridiculous economy is the name of the game and as a consequence, you have to work until you drop.

The Democrats and Republicans have robbed us blind!

Sep 14, 2011 10:15AM
I'm 69 and I had a job that I loved just to make ends meet. I was let go because I was deemed by the employer to be to old. They filled my spot with a 22 year old who was fired two weeks later for sleeping on the job. I have been looking for work for 6 months to no avail. Several potential employers used the words: "you're a little to mature for the position". It is not so much looking for a job as it is looking for an employer that doesn't care about how old you are!
Sep 14, 2011 4:33AM
What an idiot! You call them incentives to keep working, I call them mandates to make older americans work until they drop dead and can't collect social security. It's all a big **** lie that more people are living longer. The only way that's true is that there are a hell of a lot more people in this world. Most of the ones that live longer are the ones that had the cushy jobs like writing lame articles like this one. Tell me, if I work my whole life doing a physical job, how much mobility am I going to have when I can fully retire at 70? I'm 51 now and already starting to feel the pains of time!
Sep 14, 2011 8:44AM
Who's believes this line of bull / most companys since 2008 have dismissed or retired everyone near retirement age. The downturn allowed them to lower overhead ( salaries/ insurance of all types/bonus) by getting rid of the aged.There profit picture is much better for them.I was making $ 2125.00 a week working middle management in the construction field.The person who took my place made  $600.00 and thought all engineered plans were perfect.It took him two years to find out the truth.
Sep 14, 2011 11:46AM

Most of them are poor so they have to.  There ain't no rest for the wicked or those that have minimal savings and income.  If you worked and paid social security your entire life and it's not there when you it's time to retire then it's time to riot.  Why do the politicians get life time benefits when most of them do very little good for our society and all most all of them are already independently wealthy and do not need the money?  The politicians should cut their benefits before they cut others but I guess when you get to vote for your own raises and benefits then you can get away with whatever you want to even if it hurts the rest of society.


Many of societies greatest contributions have come and will continue to come from our older citizens. Our older generations in this country have a work ethic that has been lost on our younger citizens, my generation included. (gen x)  The youth of America has grown soft and lazy...just try to get a kid to mow your lawn these days...yeah These older Americans are not taking jobs away from our younger generations by staying in the workforce...the younger generations are just not as qualified, motivated and hardworking as their parents...let us be thankful that so many older people are working to support the youth of this country.


Sep 14, 2011 10:53AM
I think most people cannot retire at a reasonable age because they have lived beyond their means for years, and saved vitually nothing.  I retired at 59 and my wife at 60, and we've been retired for over 4 years now and are doing fine.  But, we have always been very conservative with our spending - always maxing out our IRA's and 401(k)'s, and doing additional savings on top of that, and we made middle-class incomes, when combined.  Never bought a house in the amount we were "qualified" for. Have owned only Subaru's since 1980, don't eat out very often, and paid cash for our retirment home in NE Florida 1 block from the beach.  Yet have relatives who plan to work  well past when we retired.  They eat out 4-5 times each week and have been doing so for years, etc., and the wife constantly talks about how she really wants to retire but they can't afford it.   Well, if that kind of lifestyle makes you happy, then I don't feel very sorry for you.  It's a matter of personal choices and accountability for those choices.
Sep 14, 2011 12:45PM
Let's not spin this a beneficial choice.  Many retiree's are working because they have to, period.  I'm sure 80% of the people don't like what they do, but continue out of necessity.  Yes there are benefits to working longer, but unless you enjoy what you do, the added work is robbing you of your golden years, which could be spent traveling, volunteering, enjoying life etc. 
Sep 14, 2011 1:39PM
Hogwash! Almost the entire article is finance industry propaganda.

Overwhelmingly, the number one reason is that they CAN'T AFFORD TO RETIRE.

1) The 401k fiasco has proven over time to be about the biggest fraud perpetrated on the citizenry since homeowner's insurance when it rains. Nobody who isn't already rich is able to make this investment last more than a few years. 90%+ of workers could contribute for 200 years and not have enough. 6% of $20K will never add up to much of anything. I am a very experienced stock trader and can say with near certainty that the REAL purpose of the 401k sham was/is to supply a steady stream of liquidity to the markets for the "real players" to use as a cushion or hedge to any losses.

2) "...Their wages are lower than those earned by their younger counterparts and lower than their own past earnings. This pattern suggests that money may not be the only motivator..."

What planet are you from??????
Money IS the only motivator! It's just that you don't make as much as a Walmart greeter than you did as an engineer or as a factory worker with 30+ years of raises under his/her belt. They get fired (what "laid off actually means) in company RIF's along with many others who are 95% over 50 and would love to get similar jobs at similar pay but can't even get an interview.

3) "...Improved health and longevity..."

Yet another bit of spin! Just spend a few weeks looking at the daily obits. I've had more than one doctor and a few health care provider professionals confirm to me that these longevity statistics are a farce and simply untrue. It's because the sample populations are skewed toward wealthier people who DO live longer. If you only average them in, of course you get higher numbers. BUT - they are a fairly small part of the TOTAL population which hasn't seen these increases due to lower nutrition levels and medical care.

3) "...Changes to Social Security made work more attractive relative to retirement. The liberalization and, for some, the elimination of the earnings test removed what many saw as an impediment to continued work...."


People in high income brackets and privileged places - such as this author - who continually try to shovel these out and out lies as PAP to soothe the masses are beyond the epitome of evil....imho....
Sep 14, 2011 12:24AM

......Stupid @#$%@^#$%@^#$@#$@^#@$&# article !!! (there is no words to describe this)


I swear, I should get all the elderly in America on that scumbag writer!  I really feel for the elderly, dang MSN you have no heart or brains at all!

Sep 14, 2011 8:58AM
After the 911 looting of the 401k's they can not afford to retire.
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