Aging Americans Forced to Work Longer: Is 70 the New 65?

The classic goal of ending your work life at 65 with financial peace of mind is slipping away. Previous generations looked forward to winding down in their mid-sixties. Now, a growing number of workers find themselves compelled to stay in the labor force longer than they ever anticipated. 

Mounting costs of living, dwindling savings, uncertain social security, and a volatile job market are forcing many to rethink their retirement plans. 

The situation does not just raise economic concerns; it sparks a deeper conversation about how Americans envision their golden years. This unsettling shift has vast implications not only for the aging workforce but for all generations to come. 

A Critical Lifeline

It would be remiss to underestimate the role of social security in safeguarding financial stability. For the vast majority of Americans, it serves as a fundamental income layer upon which to construct retirement plans. It also offers vital protection for disabled workers and families who lose their primary earners.

A growing trend among employers is to move away from traditional pensions that offer set benefits upon retirement. Instead, they are focusing on contribution-based plans like 401(k)s, which depend on how much workers invest and the returns those investments achieve. Consequently, for many, social security serves as the only guaranteed retirement income shielded from market risks and fluctuations.

Recent statistics from the Social Security Administration (SSA) indicate that nearly 67 million Americans will, on average, receive social security benefits in 2023. The sum of which throughout the year will be $1.4 trillion. It is estimated that 97% of older Americans either currently receive or will eventually qualify for benefits. Furthermore, for many beneficiaries, social security is their primary income source. SSA data reveals that close to half of retirees depend on social security for at least half of their income. For one in every seven retirees, this figure surges to 90%.

Social security also adjusts its benefits for inflation, unlike most private pensions or annuities. Without these adjustments, the Center on Budget and Policy Priorities estimates that nearly 40% of seniors 65 and older would fall below the poverty line. In other words, social security benefits elevate over 15 million older Americans above the threshold of poverty.

The Retirement Reality Shift

For the last four decades, the full retirement age for Americans has been gradually increasing from 65 to 67 years. Consequently, it is likely little surprise for anyone born after 1960 that their golden years might not quite begin at 65. What may come as a shock to some is just how geared current legislation is towards pushing workers to delay their retirement later into life. 

The SSA’s latest rules make it possible to retire as early as age 62, regardless of one’s full retirement age. However, there is a significant catch. Any worker who begins receiving benefits at age 62 or any time prior to their full retirement age of 67 may see a reduction in the amount received. This reduction can be as much as 30 percent. Conversely, thanks to delayed retirement credits, remaining in the workforce up to age 70 can result in higher benefits paid going forward.

In the face of rising living costs, many individuals find themselves working well into their retirement years. Research undertaken by the public policy think tank American Enterprise Institute notes that over the past 30 years, the average retirement age has increased by about three years, from 62 to 65. 

Financial, Physical, and Emotional Impacts

This trend is not just a personal choice but often a financial necessity driven by insufficient retirement savings, rising healthcare costs, and increased life expectancy. Estimates by the National Council on Aging reveal that a shocking eight out of ten households with seniors are either currently facing financial difficulties or are vulnerable to economic instability as they grow older.

Working involuntarily into one’s later years has been linked to a range of health issues. The National Library of Medicine conducted a systematic review exploring literature published over the last two decades on the health effects of employment in those over 64 years of age. While delaying retirement, particularly on a part-time basis, showed evidence of beneficial effects, this was primarily with men in low-demand jobs. 

On the contrary, those forced to continue working full-time for financial reasons, particularly in high-demand and low-reward jobs, were far more likely to experience adverse effects on physical and mental health. 

In addition, a need to work longer hours further compounds risks for older people. Data from the World Health Organization shows that deaths from stroke and heart disease as a result of working more than 55 hours per week have jumped 29% since 2000. The majority of these deaths are among those aged 60 to 79. 

Concerning Outlook

Current and future administrations have a major challenge ahead as Social Security and Medicare programs both continue to face significant financing issues. The latest annual report from the SSA Board of Trustees forecasts that the current form of scheduled benefits will only be fully payable until 2033. After that time, reserves of the Old-Age and Survivors Insurance Trust Fund will become depleted. Consequently, future estimates of income for the fund will only be sufficient to cover 77 percent of scheduled benefits.

Against this straining backdrop, there is renewed talk by the SSA of increasing the full retirement age to 70, which would effectively cut currently scheduled benefits by nearly 20 percent. 

A rising age for social security eligibility only compounds current issues for older people, forcing many to work longer. These cuts could be profound, and they would fall hardest on lower- and middle-income beneficiaries who rely most heavily on social security benefits.

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Mark Garro is an Aussie former CPA and corporate finance manager turned research writer. After more than two decades simplifying complex analyses for leading companies, including Goldman Sachs, Marks & Spencer, and Tabcorp, he packed up and moved to the Italian Riviera. Now he covers all things related to finance and equity research for a diverse range of publishers and syndicators around the world.