I came across a very interesting article posted in Think Advisor by The Centre of Retirement Research at Boston College. In it they examined whether it would be effective to work longer to boost American’s prospects for a secure retirement. I think this question may also be applicable to some degree in Canada.
This study concluded that continued employment could be an effective way to improve our prospects for a secure retirement. First, it would enhance funding of our CPP pension benefit while allowing more time to save extra funds in our RRSPs and TFSAs. On the other hand, shortening our net retirement time would reduce the likelihood of running out of our retirement savings. Working longer would widely be seen as a reasonable response because on average, we’re living longer and healthier lives. This then begs the question; is this realistic for all individuals across the entire socioeconomic spectrum?
Is it time to rethink our ideas around retirement: The Center examined this question by looking at the findings of a series of studies and using education as the measure of socioeconomic status. These studies indicates that while it is fair to expect workers of lower socioeconomic status to work longer, given rising life expectancies it is also more challenging for them to do so than for higher status workers.
The biggest argument for working longer is that people are living longer. “It seems reasonable for them to work a bit longer, ultimately maintaining the same share of life spent in retirement as previous generations,” the report states.
Unfortunately we’re not all living longer: As the study found, people are not living longer equally. Less educated workers have seen the smallest gains. The analysis then calculates a reasonable target for how long people could work. The results show that more highly educated individuals can indeed work longer than their less educated counterparts while still maintaining the same fraction of their life retired.
The good news is that even lower status workers can remain in the labor force long enough to significantly improve their standard of living in retirement.
The study looks at voluntary job changing as one way for workers to move to a job they prefer and potentially work longer. But will the jobs be there? It found that job opportunities narrow for workers seeking jobs after age 50, however that may be changing. Workers in their 50s, both in higher and lower status jobs who move to a new job are far more likely to remain in the labor force to age 65, the report found. Plus, options for older workers have generally expanded since the late 1990s, but lower status men still face narrower options than the better educated higher status ones.
These findings do not invalidate the working-longer prescription, the report states. Instead, the findings suggest that policymakers need to think about making ways to help make working longer work equally for everyone. Society needs to find new remedies other than working longer as the only fix. These would be new solutions that would allow lower status households to save the funds they need for an adequate retirement income.
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