The Big Payoff From Working a Few Extra Years

(Bloomberg Businessweek) -- When he turned 65 in 2013, Lee Klass never considered a retirement party. Instead, he continued doing pretty much what he’s done for years, setting out from Portland, Ore., in his Freightliner 18-wheeler and hauling loads of packaged food and consumer goods across the U.S. That way, Klass was able to keep the money flowing and ultimately collect a bigger Social Security check. “I still enjoy driving and the adventure of this job, and I’m not wealthy,” says Klass, who took home about $25,000 last year and has no retirement savings plan, but for the past three years has received roughly $1,700 a month from Social Security. “Millions of people in my age group are continuing to work,” he says. “I’ll keep doing it as long as I’m strong and healthy.”

Growing numbers of Americans aren’t ready to give up careers they find rewarding at 65, long the standard retirement age, especially when they can expect to live an additional 20 years on average. By continuing to work through their 60s and beyond, they can bulk up their retirement funds and Social Security benefits and compress the time they’ll have to live on savings. Half of U.S. workers over 59 don’t plan to retire before age 70, according to a 2017 survey by job-search site CareerBuilder. About 27 percent of 65- to 74-year-olds have full- or part-time jobs, and the Bureau of Labor Statistics predicts that will jump to 30 percent by 2026. “It’s a triple win—and for middle-class Americans especially, it’s vital longevity risk management,” says Leon LaBrecque, a financial manager at LJPR Financial Advisors in Troy, Mich.

LaBrecque recently persuaded a 65-year-old salesman to work for two more years. By staying employed until 67, he could add $48,000—two annual contributions of $24,000—to his 401(k) retirement plan, let his existing savings of about $450,000 keep growing, and delay receiving Social Security so his check would be 16 percent larger (benefits bump up by 8 percent for every year you postpone filing until age 70, when you’re required to start collecting). “My client agreed it was worth it after I calculated how doing this would give him about $200,000 more in retirement,” LaBrecque says.

With health issues and the need to care for spouses or elderly parents, not everyone can stay on the job. And while mandatory retirement no longer exists, age discrimination does. Employers can push older workers out by eliminating their positions during restructurings, and landing a new job later in life is difficult. A recent AARP survey found that 44 percent of older job applicants say they’ve been asked for age-related information from potential employers, even though this is illegal.

But in today’s tight labor markets, more companies are relying on older employees. People 55 and above are expected to comprise more than a quarter of the workforce by 2020, up from 14 percent in 2002. Companies, though, are sometimes reluctant to discuss specific numbers, says Kathleen Christensen, a program director at the Alfred P. Sloan Foundation who studies older workers. Just as many people don’t want to disclose their age out of fear they’ll be pushed out, “companies don’t want to face potential age discrimination lawsuits,” she says. “But they’re increasingly accommodating those they value who have needed skills.”

Ingersoll Rand Plc, a maker of industrial equipment such as pumps, compressors, and air conditioners, says about one-third of its workforce is over 50, and many are choosing to stay through their 60s, especially in white-collar positions. Those with technical experience and knowledge about products who can mentor younger employees are especially valued. Last year, Ingersoll Rand implemented a “ramp-down” program that lets people who want to ease into retirement work shorter hours. “Instead of doing anything to push people out, in a lot of places we’re asking people to stay,” says Michelle Murphy, the company’s chief diversity officer.

Working a few extra years can offer a bigger payoff than saving more over the decades, according to a recent study led by Stanford University economist John Shoven. The report offered the hypothetical example of someone who was 43 years old in 2013, earning about $114,000 a year, and putting 9 percent of her salary into a retirement fund. Working until age 68½ would yield the same retirement income as saving an additional 10 percent of her paycheck for 23 years and stopping work at 66. “For those able to keep jobs, postponing retirement by even a relatively short time can make a big financial difference,” says Shoven. He should know. He’s 71 and still working, with no plans to quit. 

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