As I’ve mentioned many times, I am a huge fan of the work being done by the folks at the Center for Retirement Research at Boston College.  Their reports and blog posts are always insightful and tremendously helpful to me in my work.  However, the most recent one has me scratching my head a bit as the title is “Boomers Find Reason To Retire Later”, and the gist of the post suggests that this is a good thing primarily because remaining in the labor force should improve one’s retirement security – work longer, have to save less.

They go on to suggest that there are many drivers, including Social Security changes, the demise of DB plans and greater reliance on defined contribution programs, the loss of post healthcare retirement benefits, etc.  I don’t know about you, but those seem to be negative developments that are forcing workers to remain in the labor force longer than they might want to.

Fine, the shift to more of a service economy, which they reference, from one heavily dependent on manufacturing does mean that one could conceivably do the work for longer, but we’ve read studies suggesting that more than 1/3 of Americans over 65 would like to remain actively engaged, but that only about 14% are still working.  In addition, they cite the fact that there are many more college graduates today than years ago and that those with college degrees tend to stay in the workforce longer.  Could it be that the tremendous growth in student loan debt is forcing this behavior, as the ability to set aside assets for retirement is postponed until much later as student loan debt is serviced?  This is particularly relevant especially for those dependent solely on retirement benefits from a DC plan?

Lastly, they highlight the effect of more women being in the labor force, and that married couples tend to retire at the roughly the same time.  Given that the “average” couple has a male partner that is 3 years older than their wife, this helps with retirement, too.  However, marriage trends have turned negative in the U.S. with only about 50% of adults married, which is down from a peak of 72.4% in 1960 and off by about 9% in the last decade.

I believe that Americans are remaining in the workforce longer (when they have control of that decision) because of significant changes that make retiring earlier almost a thing of the past. The demise of DB plans and loss of post healthcare benefits has played a significant role. Social Security changes for those born after 1959 are also impacting the decision to exit the workforce.  Furthermore, the explosion in student loans and use of 401(k)-type plans will continue to drive this trend upward.  Problem: our 62.9% labor participation rate is down substantially from 2007 and may not grow much in the future due to numerous factors including the greater impact from technology.