There are a lot of factors changing the concept of retirement which caused the shift from defined benefit (DB) pension plans to defined contribution (DC) plans like 401ks. But as a result of the move to the 401k world, more people are working longer as detailed in a NY Times article. The Pew Research Center reports that 18.8% of people older than 65 are still working in 2016 compared to just 12.8% in 2000 with that trend expended to increase.
The lack of retirement savings fueled in part by the demise of DB plans where companies promise a certain amount of income for life is a big factor in people working longer. In fact, DB plans greatly incent people to retire as working longer does not increase their income, just the opposite with DC plans. Delaying Social Security can significantly increase payments from $1,125 per month, for example, at 62 to $1980 at 70.
But there’s more to delaying retirement than just money – in fact, with better health and longer life spans, people might be spending more time as a percentage of their lifetime retired these days than when DB plans were more prevalent.
Some believe that there are three phases of retirement, especially for people in management or sales jobs where physical demands and telecommuting are easier:
- Less than full time work – two-thirds of older workers are part-timers.
- Travel and leisure.
- Final phase where health plays a greater factor.
But older workers, especially in jobs requiring extreme physical exertion like construction, manufacturing and the food industry, can make a company less competitive as they cost more than younger workers and they may inhibit healthy organizational development. The key for companies with a DC plan is to put people in a financial position to be able to retire so the right decision for the company and the employee can be made.
