Investing

Americans Give Up on Retirement

Douglas A. McIntyre

The American dream of retiring at 65 and keeping a standard of living similar to pre-retirement days has ended for many, if not most, aging citizens. If these people cannot fulfill their dreams, it will radically change the demographic patterns in the United States and undermine the employment opportunities of people who are much younger than those older Americans who have to stay in the workforce.

A new Gallup poll on retirement shows that:

Three-quarters of U.S. adult workers believe they will continue working past retirement age, with 40% saying they will do so because they want to, and 35% because they will have to.

Whether this work is a way to remain active or a way to supplement income from battered retirement accounts and Social Security does not matter much. The ripple effect in either case is the same.

Most economists believe that as the jobless rates hovers at 7.5% workers are at several disadvantages. The first is that there are still not enough jobs to go around. Ben Bernanke commented on this recently as he said the Federal Reserve’s bond-buying program would not be altered until the country moved closer to “full employment.” His statement was framed in such a way as to show he thinks the improvement is far off.

The second effect of the desire or need for elderly Americans to work past retirement age is that it robs the young, primarily those under 25, of their own chances to find jobs. Jobless figures show these Americans are already at a disadvantage, particularly those without college degrees. Why should employers higher them when many older people have superior education and, in many cases, skills.

Employers generally have more leverage than workers do. They can afford to pick and choose. Many can hire people part time and give them no benefits. A large number of these businesses learned from the recession that they can wring more productively out of the workers they already have. And if an older person can find a job, he may be able to rely on Medicare. Younger workers have no such safety net.

Gallup’s researchers believe they have found a pattern in the trend of older workers working beyond the traditional retirement age:

It [the trend for older people to keep working] would clearly help them financially, particularly if the alternative is dependency on inadequate retirement savings and an uncertain Social Security system. This, in turn, could benefit the economy, with seniors contributing experienced labor as well as earning income that fuels consumer spending and, therefore, the economy as a whole.

That conclusion leaves out that the younger part of the workforce will have its prospects badly damaged, which will hurt the economy in a decade or so when these people have little purchasing power or savings because they have been unable to find jobs for so long.