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Retire Better: Why ‘work longer’ isn’t great retirement advice


Financial planners typically advise people to work for as long as they can in order to juice up their retirement savings while holding out for a fatter Social Security check.

But such advice presumes that people have the luxury of deciding when to stop working. Tens of millions of Americans don’t. 

Here’s the truth: The idea of retiring early — or even at full retirement age — is little more than a joke for those tens of millions. Retire on what? Most folks have a fraction of the assets they’ll need. And pensions? Unless you work for the government — state, local or federal — chances are you don’t have one. 

Read: Social Security recipients are missing out on $182,000 by claiming too early, study finds

It’s things like the decadeslong trend of companies shifting the financing of retirement off their own balance sheets and making it the responsibility of their workers that mean millions of people have to keep working whether they want to or not. But as the Economic Policy Institute, a Washington, D.C.-based nonpartisan think tank, notes in a report, “Many face barriers to working longer and lack access to decent jobs with decent pay. Older workers who cannot afford to retire often face diminishing job quality and earnings as a result of loss of bargaining power.”

It’s a painful Catch-22. 

The Federal Reserve said in a 2020 report that white families have the highest level of both median and mean family wealth: $188,200 and $983,400, respectively. Median — which means half have more and half have less — is the key figure here: Using the often-recommended 4% withdrawal rule, a person with $188,000 would have about $7,500 each year to live on. That’s a paltry $625 per month before taxes.  

Think that’s bad? Now consider the Fed’s data on Hispanic and Black families. The median wealth for Hispanic families is $36,100, while for Black families it is a meager $24,100. 

Hispanic and Black workers “are particularly disadvantaged in the labor market and ill-served by a retirement system that relies on employers to voluntarily provide benefits,” says Heidi Shierholz, president of the EPI.

This disadvantage is a deeply rooted structural problem, the report notes, in that Black and Hispanic workers are typically on lower rungs of the economic ladder and that their “bad jobs lead to bad retirements.” 

But given the median savings rates, even a “bad retirement” often isn’t an option. Many people are forced by economic necessity to keep on working, usually in the same kind of lower-paying jobs with minimal — at best — benefits. In other words, there’s no way out.  

“Some workers may benefit from delaying retirement to increase their savings and accrued benefits while shortening their retirement,” the EPI says. “But expecting workers to work into old age is neither a feasible nor an equitable solution to the retirement crisis. For one thing, the increase in life expectancy has been concentrated among higher earners with jobs that are less physically demanding. For another, Americans already work more, and longer, than workers in most peer countries.”

The pandemic has compounded the problem. The Brookings Institution says that long COVID is keeping millions out of the labor force. Many workers on the lower rungs of the ladder may not have the luxury of working from home and may have to choose between risking their health or giving up a job.    

This underscores the importance of the two benefits that minority workers rely on: Social Security and Medicare.  

Read: Don’t make these 5 mistakes during Medicare open enrollment

The financial safety net offered by Social Security is particularly important for Black and Hispanic workers and other workers of color, says the agency’s acting commissioner, Kilolo Kijakazi, who notes that Social Security income makes up a “large share of total retirement and disability income for people of color and for women.” She calls out “structural barriers” that “contribute to the disparity of economic well-being” for these groups.  

Read: Are you fit for your age, or are you frail? Here’s how to find out.

There are numerous policy proposals that could help dismantle these structural barriers. The EPI report suggests expanding the earned-income tax credit, which could help more adults without dependent children. Tax breaks could offset the cost of providing health insurance to older workers. And how about better enforcement of age discrimination laws? Of course, that would only help if workers knew their rights and what steps they could take if they felt they were being discriminated against because of their age. 

Can any of these things happen? Aside from better enforcement of age-discrimination laws that are already on the books, the political divide that is about to define Washington — with Democrats continuing to hold the Senate and Republicans taking control of the House — suggests we’ll have gridlock for the next two years.

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