What Pan-Wielding Parisians Might Like to Know:  The Advantages of Working Later in Life

In recent weeks, French protestors have been banging pots and pans in protest of President Macron increasing the French retirement age from 62 to 64.  This process of change in France has been interesting for many Americans to watch since, similar to the French state pension system, the Social Security system in the U.S. is in need of adjustment as the median age of the population rises.  The age at which one is eligible for state retirement benefits, however, does not necessarily need to dictate when one stops working.  Research suggests in fact that there can be numerous advantages to continuing to work later in life.

So, when is a reasonable age to retire?  For most Americans, Medicare eligibility starts at age 65, and Social Security defines full retirement age as 67, so many workers pin their expectations to those benchmarks.  However, while retirement is an important and worthy goal to strive for (especially not knowing what health issues or other unexpected events life may have in store), recent studies have shown that working past age 65 can have numerous benefits, which extend beyond financial stability to include mental, physical, and societal wellbeing. 

Financial Security.  From a financial standpoint, working longer can have significant benefits. All else being equal, the longer people work, the more time they have to accumulate savings and the less time they have to drain it.  Additional years of work may also enable individuals to delay collecting Social Security benefits, which enables higher monthly payments in the future. By delaying Social Security benefits until age 70, for example, individuals can receive up to 77% more in monthly payments as compared to starting benefits at age 62.  And, depending on their prior work history, additional work may also increase the amount of their Social Security benefits since the retirement benefit is calculated based on an individual’s highest 35 years of earnings.

Mental and Physical Wellbeing.  Beyond financial benefits, there can be advantages to working longer in terms of mental and physical health. Many people find a sense of purpose and fulfillment in their work, which can contribute to their psychological and emotional well-being.  In fact, studies have shown that older workers tend to have higher job satisfaction than their younger counterparts. This could be due to a variety of factors, including the sense of mastery and expertise that comes with age, as well as the fact that older workers tend to have established social connections within their workplace.  Working longer can also boost one’s physical health, especially if the work itself is not overly stressful or physically taxing.  According to a publication by Harvard Medical School, “A 2015 study of 83,000 older adults… suggested that, compared with people who retired, people who worked past age 65 were about three times more likely to report being in good health and about half as likely to have serious health problems, such as cancer or heart disease.”

Societal Benefits.  As the population ages, there is a growing need for older workers to remain in the workforce in order to maintain productivity and economic growth. Larry Siegel, director of research at the CFA Institute Research Foundation points out, “The additional work done by older workers is, by definition, beneficial to others – or they wouldn’t be getting paid for doing it. Personal services provided, widgets manufactured, classes taught, and so on, are the reason for working in the first place. Money is just the incentive to get people to produce these real economic goods.” Additionally, many older workers possess valuable skills, experience, and a work ethic that are difficult to replace. A recent Wall Street Journal article highlighted that many companies are actively looking to hire older workers given their superior work ethic and dedication to the task.  This also enables older adults to pass on their knowledge and expertise to younger generations.  Finally, for jobs involving client or customer interaction, working longer translates into lower employee turnover, which is preferable to customers.  As one study referenced in a Wharton Business School article observed, “Longer tenure produces not only a significant economic benefit to employers in terms of cost savings related to acquiring and training replacement workers, but also through increased customer satisfaction.” 

Of course, there are also potential drawbacks to working longer. Some older workers face age discrimination in the workplace, which can make it difficult to find or maintain employment. Additionally, certain jobs might be particularly stressful or physically taxing, which could take a toll on one’s health.  One potential solution to the challenges of working longer is to explore alternative work arrangements. Many older workers choose to work part-time or take on consulting roles, which can provide flexibility and reduce the physical demands of full-time work. Additionally, some companies are beginning to implement age-friendly workplace policies, such as flexible schedules, job sharing, and phased retirement programs, which can help older workers stay engaged in the workforce. In order to reap the benefits of working longer, it is important to start planning early. Exploring the possibility for alternative work arrangements in the years prior to retirement age and continuing to develop skills and expertise later in one’s career can help keep doors open for the option to work longer if one desires.  As financial planners, of course, we advocate that clients try to be financially prepared for retiring prior to full retirement age in case working longer is not an option.  However, if it is an option, there are clear benefits to pursuing that path.  In the interest of wellbeing though, just don’t argue the point too forcefully with a pan-wielding Frenchman.