Retirement Age: 65 and Rising

Kelly White has done a lot in his 70 years, from operating a bulldozer to running his own construction company. He’s worked in military intelligence, owned an apple orchard, and invested in the stock market. By almost anyone’s standard, he’s earned the right to slow down.

But the times, they are a changin’. Like many of his peers who have hit retirement age, White is working as hard as ever, “probably harder than I did in my 30s,” he says. These days you’ll find him crunching numbers and serving customers at the HoneyBaked Ham store in Silverdale, Washington, where he and his wife, Sue, put in close to 50 hours per week —apiece.

The Whites tried retirement and didn’t take to it. “We just got bored. We also lost a fair amount of money in the stock market spiral.” So they launched a new career as owners of a popular food franchise.

Ironically, the downturn to which White referred was the dot-com collapse of 2000 and 2001. That seems like small potatoes compared to the 2008 market collapse, which has made work a virtual necessity for many people 65 and older. Other key factors—Congress’s decision to raise retirement age, the escalating cost of health care, and an aging populace—have contributed to the new economic reality: Retirement age just isn’t what it used to be.

Retirement security “is being eroded from a number of sides,” according to a joint study by the Economic Policy Institute and the Center for American Progress. “The decimation of retirement savings due to a sharp stock market decline, historically low interest rates, and in some cases, corporate fraud, has reduced household savings. In addition to these factors, retirement income security has also been undermined by rising health care costs.” The U.S. Department of Labor confirmed the trend in a recent report. “With the baby-boom generation about to start joining the ranks of those age 65 and over, the graying of the American work force is only just beginning,” it said.

Roughly 6.1 million people age 65 or older are in the work force today, compared to 3.8 million 10 years ago. No other age group has seen such huge jumps in employment in recent decades. Between 1977 and 2007, employment of workers 65 and over increased 101 percent, compared to a 59 percent increase for total employment, according to the Bureau of Labor Statistics. The number of employed men 65 and over rose 78 percent; employment of women 65 and older increased by 147 percent. Although they’re still less than 1 percent of the total labor force, the number of working folks 75 and older jumped a whopping 172 percent.

In the latest AARP survey on the subject, 70 percent of “mature workers,” those between 50 and 70, said they’ll keep working through their 60s and 70s. Sixty-four percent of those working now cited financial need as the reason. Another 11 percent mentioned financial security and the desire “to save more for retirement.” Keeping health care benefits was another commonly stated reason.

Even with Social Security and pension benefits, many older people simply haven’t saved enough to retire. And some who thought they had enough watched the worth of their 401Ks and other nest eggs plummet by 30, 40, or even 50 percent this past fall.

“A lot of the value of my assets is declining precipitously,” says Tina Beer, 67, of Sarasota, Florida, who retired at 65 after 35 years in higher education, most recently serving as dean of liberal arts at the Ringling College of Art and Design.

A year ago, Beer went back to work. This time she chose a part-time and virtually stress-free position that allows her to be outdoors much of the time, which makes it fun. As a pet sitter and dog walker for Fetch! Pet Care, she can earn from a few hundred to almost $1,000 per month. The extra income helps Beer and her 73-year-old husband afford travel, entertainment, and the extras they couldn’t otherwise enjoy. Plus the job is flexible: If she and her husband want to go sailing for a couple weeks, she just notifies her employer, and he finds someone else to take her jobs.

Although Beer could have started her own pet sitting business, she affiliated with a franchise so she wouldn’t have to worry about filling out paperwork, finding clients, collecting money, or other details of owning a business. Beer’s only concern is not to earn too much. Social Security benefits become taxable once the total of adjusted gross income, tax-exempt interest income, and one-half of Social Security benefits exceeds $25,000 for individuals or $32,000 for couples.

Unfortunately, folks wanting to retire early or work past retirement age have to keep track of such things to avoid running afoul of Social Security and pension rules that can end up costing them.

Historically, 65 has been considered normal retirement age because it’s when people can claim full Social Security benefits. In 1983, Congress voted to gradually raise the full retirement age beginning with people born in 1938 or later. For anyone born after 1959, full retirement age is 67. Congress based its decision on the improved health of older people and increases in average life expectancy.

People can still start receiving Social Security benefits at 62, but there are reasons not to. If you’re under full retirement age when you start drawing benefits, you’ll lose $1 in benefits for every $2 you earn above the annual limit. For 2009 that limit is $14,160.

If anything, the trend now is to delay claiming benefits as long as possible, which is currently age 70. People who keep working will be rewarded in the form of a delayed retirement credit: A person born in 1943 or later gets an 8 percent higher check for postponing retirement until they are 70. Also, Social Security benefits are based on your top 35 earning years, so those who work past the normal retirement age and continue to make good money can ensure a bigger monthly check.

There are some obstacles, however, for those who want to stay in their current jobs, especially if their employers are among the minority still offering defined benefit pension plans. Under the terms of many of these plans, companies cannot make both salary and pension payments to the same worker at the same time. In addition, some pension plans base their payouts on an employee’s salary during the last year of full-time employment. A worker who stays with his current employer but downsizes his job and accepts reduced salary could actually lose money if the distribution is based on the lower salary amount.

Fortune 500 companies such as Boeing, Eli Lilly, and P&G have found ways around such predicaments. They still use senior, retired workers, but they find and retain them in nontraditional ways, explains Linda Muskin of Clarus Communications. For example, some firms contract with YourEncore (yourencore.com), which has a database of more than 4,000 retired engineers and scientists interested in working on projects in which they can make a meaningful contribution, have a flexible schedule, and get paid for their expertise.

Companies and retirees are less likely to butt heads with Employee Retirement Income Security Act (ERISA) laws governing postretirement compensation when they work through a third party, Muskin said. The Employee Retirement Income Security Act of 1974 is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry. Although the purpose of the law is to provide protection for individuals in these plans, some of its rules actually discourage postretirement employment.

Sen. Herb Kohl, (D-Wis.), who chairs the Senate Special Committee on Aging, has introduced legislation to eliminate these kinds of barriers for older Americans who want to stay in the work force longer and to encourage employers to recruit and retain older workers. The Incentives for Older Workers Act (S. 2933) addresses both the pension and Social Security dilemmas. It would prohibit pension plans from penalizing individuals for continuing to work on a reduced schedule, and it would revise the Social Security benefit reduction to $1 for every $3 earned before full retirement age. The bill also would allow individuals to earn delayed retirement credits for Social Security purposes for an additional two years until age 72, instead of the current limit of 70.

Bottom line: Retiring at 65 is no longer a realistic American dream for workers or corporate America. Public policy needs to change to reflect that fact.

If you’re 65 and fairly healthy, chances are good you’ll live another 20 to 25 years. To retire at the level recommended by financial planners, you’d need about 75 percent of what you were earning when fully employed, multiplied by the number of years you’re expected to live. As an example, someone making $100,000 would want to have at least $1.5 million in the bank. Such savers are the exception, not the rule.

Fortunately for seniors, the need to work longer coincides with a looming labor shortage forecast for many sectors of the economy as baby boomers age out of the work force. Economists say the spike in unemployment that occurred in 2008 is temporary. According to the Special Committee on Aging, the U.S. labor pool will face a shortage of up to 35 million workers by 2030. Fields already reporting shortages include health care, technology, social services, education, public utilities, and engineering.

A multitude of nonprofit and commercial ventures have sprung up to connect seniors with employment and service opportunities. SeniorJobBank (seniorjobbank.org ) is an online service aimed at the over-50 community where job seekers can search job listings and employers can post openings. The AARP Foundation offers two programs to help qualifying seniors find meaningful, well-paying jobs. The Senior Community Service Employment Program targets those 55 and older who are unemployed and need to work to survive. Seniors are placed at “host agencies” such as food banks and hospitals, where they work 20 hours a week and receive at least minimum wage. The jobs are considered temporary while the seniors hone their skills and the program helps locate permanent part-time or full-time work. Another AARP program, WorkSearch, provides career placement advice and the training seniors need to remain in or re-enter the work force.

For those who want to continue to feel useful but don’t necessarily need the money, a campaign called The Experience Wave (experiencewave.org ) is working to change federal tax law to permit older people to treat the time they spend volunteering for nonprofit groups as tax deductible. There’s an irony, of course, to this latest trend of seniors working past 65. One of the great achievements of the 20th century was making retirement a viable option for so many. The allure of travel, spending time with grandchildren, and enjoying a well-deserved rest had become the Holy Grail of the aging process. Here we are now, just a few years into the 21st century, and the goal is to make it easier for seniors to remain or return to work.

The best of both worlds, of course, would be one in which the laws were flexible enough that seniors could jump in and out of the labor force as it suits their needs, and employers could recruit older workers without anyone assuming additional financial risk.

Henry Ford once said, “Nobody can think straight who does not work. Idleness warps the mind.” It’s a sentiment with which Tina Beer and Kelly White and many of their peers fully agree. Over one-third of White’s fellow HoneyBaked Ham franchisees are “retired” workers.

“What I like about my job,” Beer says, “is it’s outdoors most of the time and, to me, that’s play. I get to play with adorable dogs and cats and supplement my income.”

“Unless you’re really active, you do begin a process of mental deterioration as you age,” White says. “Working keeps us young.” And that’s the silver lining to the new economic reality.