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Planning to work longer hours is a popular escape for Americans who feel they have too little saved to support themselves in old age.
About 27% of workers intend to work They need to supplement their income in retirement, according to a new survey from CNBC and SurveyMonkey. They surveyed 6,657 U.S. adults in early August, including 2,603 retirees and 4,054 people who work full or part-time, are self-employed or own a business.
Retirement experts say that while working longer is one of the best ways to increase your savings, the plan can backfire.
For example, workers may not be able to work until their late 60s, early 70s, or later due to unexpected health complications or layoffs.
“It sounds great on paper,” says Philip Chao, a certified financial planner and founder of Experience Wealth in Cabin John, Maryland. “But the reality could be very different.”
If workers lose those wages, they will have to find another way to maintain their retirement savings.
Workers often retire earlier than planned
The non-existent “escape valve”
Zhao said Americans often look to later retirement ages “as a safety valve, but that safety valve doesn’t necessarily exist.” “But saying it and doing it are two completely different things.”
Zhao said this could ultimately be a “very dangerous” assumption.
According to the EBRI survey, many people (35%) retire early because of difficulties such as health problems or disabilities. Another 31% retired due to “company changes” (such as layoffs).
Sounds great on paper. But the reality may be very different.
Zhao Guoping
Experience Wealth Founder
More than half (56%) of full-time employees are in their early 50s kicked out of work due to layoffs and other circumstances before they are ready to retire, according to a 2018 paper from the Urban Institute. The newspaper found that if these workers eventually found another job, their earnings would typically be significantly less.
Of course, some people exit the workforce early for positive reasons: EBRI found that more than a third (35%) of people retired earlier than expected because they could afford it.
There are benefits to working longer hours
Retirement experts say this is a financial benefit for those who can afford to work longer hours.
First, workers can delay withdrawing their savings; thus keeping their savings intact longer and potentially allowing them to continue to grow through investment profits and additional contributions. Workers can also defer receiving Social Security benefits, which can increase the amount they receive.
Some people keep working longer because they love it: About a quarter (26%) of workers say they want to continue working after retirement, and 17% of retirees continue to work in some capacity, according to the CNBC Retirement Survey. Because they love it.
American Non-financial benefits may also be obtained Extended working hours, such as improved health and longer lifespan. However, research shows that this benefit depends on the stress workers experience on the job and the physical demands of the labor.
Extended working hours also seem more likely for a growing number of older workers.
“Moving from a manufacturing economy to one focused primarily on providing services and information is conducive to working into old age,” said Gallup analyst Jeffrey Jones. Wrote.
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