The Crisis of the Unretired American

Richard Eisenberg: It used to be that retirement meant pretty much a life of leisure for most people. They quit working their full-time jobs and then they would be retired for the rest of their lives. These days, a lot of people see it differently.

Stephanie Kelton: Welcome to the Best New Ideas in Money, a podcast for MarketWatch. I'm Stephanie Kelton. I'm an economist and a professor of economics and public policy at Stony Brook University.

James Rogers: And I'm James Rogers, a financial columnist at MarketWatch.

Stephanie Kelton: Each week we explore innovations in economics, finance, technology, and policy that rethink the way we live, work, spend, save, and invest.

James Rogers: Stephanie, do you ever think about retirement?

Stephanie Kelton: I don't think about it a lot, but last week I got something from a former employer telling me about upcoming changes to the retirement plan, so I started thinking about it last week. What about you?

James Rogers: Yeah, I do think about it. Some friends of mine have recently taken early retirement, which has really kind of got it on my radar and I suppose it's the type of thing now that I'm getting to an age where it's starting to look a bit more like a reality rather than just an idea, but it's still a ways off.

Stephanie Kelton: Yeah, for me too. I don't have plans to retire for a long time.

James Rogers: But if a new trend continues, retirement might be even further off than we think. Employment rates among seniors have been on the rise. According to the US Bureau of Labor Statistics, last year 26.6% of Americans aged 65 to 74 were still working and rates were also up for workers age 75 and up.

Stephanie Kelton: Those figures are projected to continue to rise. A recent survey from the Transamerica Center for Retirement Studies found that nearly half of working baby boomers expect to stay in the labor force past 70.

James Rogers: So what's behind that change?

Angela Moore: There's a lot of reasons why people are continuing to work. One is, the easiest for money.

James Rogers: That's Angela Moore, MarketWatch's retirement editor.

Angela Moore: We are in what people are calling a retirement crisis where people don't have enough to retire. The median retirement account balance is shockingly low. And once you retire, you don't have any more money coming in. So a lot of people are continuing to work. And they're not always continuing to work at their usual career job, sometimes they will do a part-time job. Maybe it's working at a cafe or doing some consulting. Or if in their regular job they were a lawyer, they may look over contracts for somebody. It's something that is fewer hours but still gives you some money. So plenty of people are still doing that. Also, if you do that, it allows you to hold off claiming Social Security.

Stephanie Kelton: Angela says, these days, many people try to wait until they turn 70 to claim Social Security. You can start taking it as early as age 62, but many people wait until they reach what's known as the full retirement age.

Angela Moore: Full retirement age right now is 67. And full retirement age is a technical term, and you would get your full amount. That amount is a percentage based on a very complex formula that has to do with how much you've earned over the years, and it's divided over a certain number of quarters of earnings. But if you wait until you're 70, you get more. People are kind of rolling the dice that, I'm probably going to live longer if I wait until 70. If I can hold out until 70, I'll have a bigger check for the rest of my life. And that's what makes Social Security so amazing and so important, is that it is the only thing that exists like this. It is an annuity that is inflation protected and it will last for the rest of your life. If you're in good health and if you have enough resources and if you can hold off till 70, for a lot of people, a lot of pre-retirees or retirees, that is something that they strive for. Because you don't know what's going to happen down the road and it's nice to know that you're going to have this guaranteed income for the rest of your life.

James Rogers: Financial planning is definitely a key component of why more Americans are working longer, but it's not the only factor.

Richard Eisenberg: More and more people are thinking of retirement much differently than our parents and grandparents used to think about it. It used to be that retirement meant pretty much a life of leisure for most people. They quit working their full-time jobs and then they would be retired for the rest of their lives, which often wasn't very long and they were not working by and large. These days, a lot of people see it differently.

James Rogers: That's Richard Eisenberg.

Richard Eisenberg: I write The View from Unretirement column from MarketWatch.

Stephanie Kelton: Unretirement, that's a term Rich himself likes to use.

Richard Eisenberg: Some people call it semi-retirement. What it means is that they're doing some work part-time in retirement, but then they're spending the rest of the time doing other things, like volunteering and mentoring and traveling and seeing family and friends. The work part of it is partly financial.

James Rogers: But it also goes beyond that. Retirement often looks different than we imagine it. Here's Angela Moore again.

Angela Moore: People often think, "Oh, when I retire I'm going to be fine. I love to go on vacation and I never worry about work or I never miss work when I'm on vacation." Going on vacation is not the same as retiring. When you retire, people really feel like they don't have a purpose anymore. You look at your day and you used to have people calling you up to solve problems, which maybe was annoying, all the problems you had to solve, all the office politics you had to deal with, you didn't love it. But maybe you look at a day where nobody actually wants anything from you, nobody cares what you think, and that can be really distressing to people.

Stephanie Kelton: Two recent surveys bear out this idea that retirement often doesn't meet our expectations. The first, called the Retirement Perspectives and Attitude Survey, found that 52% of pre-retirees believed the transition to retirement would be smooth. Just 32% of retirees said it was.

Richard Eisenberg: A lot of them said it was kind of bumpy for them. And they weren't unhappy, they just said there's a transition.

Stephanie Kelton: It also took longer than they expected.

Richard Eisenberg: Pre-retirees thought it would be about six months or less, but the people who were actually retired said, no, it actually took them a year or longer to feel like they had made the transition into retirement.

James Rogers: The second survey, titled The Great Retirement Disconnect, took a look at retiree's biggest non-financial fears. It also showed a contrast between pre-retirees and those who had already retired.

Richard Eisenberg: As you can imagine, people who were not yet retired were mostly worried about finances when they were thinking about retirement. But the retirees themselves said they were mostly concerned about health and also things like the political and economic environment. They were concerned about their financial situation too, but less so than the people were before they retired.

James Rogers: It's not just perceptions from workers that have shifted. Over the last three years, the way we think about work itself has changed dramatically with huge implications for older employees.

Angela Moore: COVID really did a lot for older people working. One, working from home became so common and so it made it easier for people who maybe didn't want to commute, of all ages. Right? Or who live in a place that isn't a hub of industry to be able to work, to work at a job that paid real money for longer. Right? It's easier on your body and it could be a lot more flexible. So that really helped people of all ages. It helped older people in a way also because we've heard a lot about ageism at work and if you're remote, a lot of times people don't know how old you are. So that's really helped older people as well. And the labor market in terms of, we saw a real situation where companies were really scrambling for workers, and it gave older people, who often feel pushed out of their companies as they get to a certain age, it made them feel like their companies still wanted them. And it was a pretty smart move for the companies as well because you've got these people who really know what they're doing.

Stephanie Kelton: Ongoing demand in the labor market has also led some companies to change their thinking around senior employees.

Richard Eisenberg: For many years, there's been a lot of age discrimination by employers towards older workers, both in terms of keeping them and hiring them. They didn't want to do it, in many cases, they thought they were too expensive. They would say that they didn't have the technological skills. They had lots of reasons why. But with employers needing workers, we're seeing a little less of the age discrimination because they need people of any age to do the job. So in many cases, they are now keeping or hiring older adults in a way that they hadn't done before.

James Rogers: Angela Moore agrees.

Angela Moore: I think that companies are seeing that you can't really paint people with a broad brushstroke of young workers are this, older workers are that. Because every worker is different. And if you look at older workers, you see people who have a lot of experience, have a lot of institutional knowledge, and maybe they don't want to do a full-on full-time gunning for the CEO role job. But maybe they want to do something part-time or three quarters time, or even just something that's a little bit of a detour from what they have been doing all along. Like maybe they want to do some training or maybe they can be some sort of a mentor to people in the office. Or there's a million roles, right? And some companies have been really smart about creating a glide path for people who are older workers to allow them to take slightly different roles. This kind of acknowledges that this person doesn't want this particular role anymore, but they don't necessarily want to leave. Part of what people really enjoy about work is the social aspect, is feeling connected to people. And they don't want to keep going 65 miles an hour down the highway, they may want to downshift and do 40 miles an hour. And actually, if everyone can be honest about this, companies and workers can really benefit.

James Rogers: Coming up, continuing work isn't the only option for retirees who want to stay engaged. How else to combat the loneliness factor? That's after the break.

Stephanie Kelton: Welcome back to the Best New Ideas in Money. Before the break, MarketWatch's Angela Moore and Richard Eisenberg walked us through why employment rates among seniors are on the rise and projected to continue to grow.

James Rogers: But for retirees who are finished with working, retirement doesn't always look as they'd expect. In particular, social connections can be difficult to come by. Here's Angela Moore.

Angela Moore: The loneliness factor is huge. People often feel adrift when they retire. Finding connections to other people, whether it's through part-time work or doing things with your family, or even local politics or just finding out what's going out in your town, or taking care of your grandkids or whatever. There's a lot of things to do, but retirees are often not reaching out to this.

Stephanie Kelton: Part of the reason may be that loneliness comes as a surprise to many retirees. One of the surveys we mentioned in the first half of the show found that pre-retirees thought they would make more connections during retirement. But as Rich Eisenberg notes, that wasn't the case.

Richard Eisenberg: The reality was that retirees, 84% of them, said they saw a decline in their social network, sometimes more than half of a decline in the daily social interactions they had. And 62% said they missed the social connections of work. So I do think it's something you'd want to think about as you're getting close to retirement, which is, what are you going to do to stay active and involved and see other people ideally in person, but if not, then by Zoom and FaceTime, virtually, whatever it takes just so you don't become totally isolated. Because becoming isolated can be very bad for your mental health, can lead to depression, can lead to other physical ailments as well. So it's really important that people take care of themselves and do what they can to keep those social connections up.

James Rogers: One way to do that, volunteering.

Richard Eisenberg: I've been doing a lot of volunteering since I started my retirement, and I really enjoy it for lots of reasons. For one thing, it gets me out of the house, I get to see people, I feel like I'm helping people. But I've also seen studies that show that volunteering in retirement can be good for both your mental health and your physical health. You can make new friends, younger and older people as well. It can have all kinds of benefits.

James Rogers: But those benefits aren't being felt by the majority of retirees. Here's Angela Moore again.

Angela Moore: Only 26% of the nation's 70 million retirees volunteer. And that is despite the fact that this group is so knowledgeable, has a lot of great experience and a lot of emotional intelligence to share. And the overall rate for volunteering isn't that great either. The overall rate for all ages is only 23%. And the reason why that is, some people say, "Oh, my volunteering is taking care of my family." That's fine. And some people say, "Oh, there's some sort of like a barrier." That people don't want to do it, that maybe they feel scared, they don't feel like they can take that leap, and I think that there is maybe a shyness and a discomfort to it. But you see on the flip side, there's all these organizations that are actively looking for these people. And we've seen that volunteering can raise your sense of wellbeing enormously. So there's a study from the University of Toronto that found that adults aged 45 to 85, who participated in volunteering and recreational activities aged more successfully than those who didn't. Those who volunteered or did charity work were 17% more likely to maintain excellent health than others. So really, even if selfishly you do it, it's so good for you. Right? And we've got another study, an Age Wave Edward Jones survey of retirees, that showed that people who volunteered were more likely to feel happy at 64%. They were also more likely to feel resilient, purposeful, and healthy.

Stephanie Kelton: While he notes that he'd like to see nonprofits do a better job of reaching out to retirees, Rich Eisenberg says there are a lot of resources available to those looking for opportunities.

Richard Eisenberg: There's a program that the federal government has, called AmeriCorps Seniors. A lot of people have heard of AmeriCorps, but this is a program where it's specifically for older adults who want to volunteer, and they can do it in lots of different ways. They've got something called Foster Grandparents. They have something called RSVP. So you can do it in person, you can do it virtually, but you'd be surprised how many nonprofits where you live would love to have you help out as much as you can, whenever you can. You don't have to feel like you have to do a certain number of hours or certain days of the week or anything. If you don't know where to go, there are websites like VolunteerMatch that can help you find places that are looking for volunteers. And the AmeriCorps Seniors website can do that too.

James Rogers: There's a strong emphasis on planning for retirement financially, but both Rich and Angela say that's missing a big piece of the puzzle.

Richard Eisenberg: It's so important that people think about retirement holistically. A lot of us, and financial advisors in particular, view it as purely financial. How much money do you have and how many years are you going to be retired and is it going to last? And all that's very important. But there's also the psychological side of retirement and the social connection side and all those things. And I wish that financial advisors, and I wish employers, would do a better job of helping older adults think about retirement from those perspectives. And people would start thinking about, well, not just what are you going to retire from, but what are you going to retire to? How are you going to spend your time and will you be doing work? If so, what kind and how much and how are you going to fill up your days? 'Cause you're suddenly going to find a blank calendar and you'll want to fill it up. Maybe not as full as it had been when you were working full-time, but you probably don't want to be looking at an empty day every day either.

Angela Moore: It's funny, the financial aspect of retirement is of course important. The emotional side of it, the non-financial sides or the squishy side of retirement, isn't something that we look at very much, but when people actually retire, the emotional stuff is really what throws them for a loop. And I do think that it makes sense for us to do pre-retirement planning of that squishy stuff. So I think that we all owe it to ourselves at all stages of our lives, always to be nurturing that part of us that isn't just about everybody else, but that's about ourselves. And think, "What do I want to do? How can I be of service to the world? What's my place in the world and what kind of legacy do I want to leave?"

Stephanie Kelton: Thanks for listening to the Best New Ideas in Money. You can subscribe to the show wherever you listen to podcasts. If you like what you heard, please leave us a rating or review. And if you have ideas for future episodes, drop us a line at [email protected]. Thanks to Angela Moore and Richard Eisenberg. To learn more about the latest in retirement, head to marketwatch.com. I'm Stephanie Kelton.

James Rogers: And I'm James Rogers. The Best New Ideas in Money is a podcast from MarketWatch. The producers are Mette Lutzhoft and Katie Ferguson, who also mixed this episode. Melissa Haggerty is the executive producer. Tim Roston was our newsroom editor on this episode. The Best New Ideas in Money theme was composed by Sam Retzer. Stephanie Kelton is an economist and a professor of economics and public policy at Stony Brook University and not part of the MarketWatch newsroom. We'll be back next week with another new idea.

Originally published by MarketWatch staff at MarketWatch