Why ‘working longer’ isn’t great retirement advice


Financial planners typically advise you to work as long as you can so you can build up your retirement savings while taking home a fatter Social Security check.

But such advice assumes you have the luxury of deciding when to stop working. Tens of millions of Americans do not.

Here’s the truth: Retiring early or even at full retirement age is nothing more than a joke for these tens of millions of people. Why retire? Most people have some of the assets they will need. What about pensions? Unless you work for the government—state, local, or federal—you’re out of luck.

Read: Social Security recipients lose $182,000 by claiming too early, study finds

It’s things like this – the decades-long trend of companies shifting pension funding off their balance sheets and onto the backs of their employees – that mean millions of people continue to work whether they want to or not. However, a wide-ranging report from the Economic Policy Institute (EPI), a non-profit, non-partisan think tank based in Washington, noted that “many face barriers to working longer and lack access to decent jobs with decent pay. Older workers who are unable to retire often face reduced job quality and earnings as a result of the loss of bargaining power.

It’s a painful Catch-22.

Here, too, there is a racial divide. The Federal Reserve said in its 2020 report that white households had the highest levels of both median and median household wealth: $188,200 and $983,400, respectively. The median – which means half are more and half are less – is the key figure here. If half of white families have less than $188,000, that means they could withdraw about $7,500 each year to live on, using the often-recommended 4% withdrawal rule. That’s a paltry $625 a month before taxes.

Do you think this is bad? Now look at the Fed’s data on Hispanic and Black and Hispanic families. The median wealth for Hispanics is $36,100, compared to a paltry $24,100 for black households.

EPI President Heidi Shierholz says Hispanics and blacks are “particularly disadvantaged in the labor market and poorly served by a pension system that relies on voluntary employer contributions.”

The report notes that this deficiency is a deep-rooted, structural problem. iThat blacks and Hispanics typically work at the bottom of the economic ladder and that their “bad jobs lead to bad pensions.”

But again, given the savings rates mentioned above, even a “bad retirement” isn’t an option. Thus, many workers are forced by economic necessity to continue working the same types of low-wage jobs, usually with minimal benefits at best. In other words, there is no way out.

“Some workers may benefit from delaying retirement to increase their savings and accrued benefits while shortening their retirement years,” EPI says. “However, expecting workers to work into their old age is neither a feasible nor a fair solution to the pension crisis. First, increases in life expectancy have been concentrated among high-wage earners in less physically demanding jobs. On the other hand, Americans already work longer and longer than workers in most peer countries.

A pandemic is another problem. The Brookings Institution claims that “long Covid” is pushing millions out of the workforce. Many workers on the lower rungs of the ladder may not have the luxury of working from home and may have to choose between risking their health or giving up the meager job they currently have.

This painful reality underscores the full importance of two benefits that minority workers can rely on: Social Security and Medicare.

Read: Avoid these 5 mistakes during Medicare open enrollment

The financial protections offered by Social Security are especially important to black and Hispanic workers and other workers of color, says Acting Social Security Commissioner Kilolo Kijakazi, who “makes up a large portion of total retirement and disability income for people of color,” and women for.” He calls “structural barriers” that “contribute to inequality of economic well-being” for these groups.

Read: Are you fit for your age or weak? How to find it.

There are numerous policy proposals that could address these structural barriers. The EPI report suggests expanding the earned income tax credit, which could help more adults without dependent children. Tax credits can offset the cost of providing health insurance to older workers. And how about better enforcement of age discrimination laws? That is, what could workers do if they knew their rights and felt discriminated against because of their age.

Could any of these things happen? Aside from better enforcement of age discrimination laws already on the books, the political divide that is coming to define Washington — with Democrats continuing to hold the Senate but Republicans taking over the House — suggests gridlock for the next two years.



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