Many Americans retire years before they want to
Richard Rocco, 60, of Voorhees, N.J., planned to work as a
sales representative until age 65. It hasn't quite worked out that way.
In January 2005, Rocco's employer, a graphics arts company, downsized and cut
his position. Despite 27 years of sales experience, Rocco couldn't find a job.
Employers "could get college guys for less than half of what I wanted to work
for," he says.
Rocco, who's single, says he couldn't afford to retire. So he used his 401(k)
savings and home equity to buy a PostNet franchise, which provides printing and
graphics services. He enjoys running his own business, but the hours are long.
Rocco puts in about 12 hours a day and has yet to draw a salary. He's living off
his savings until his business gets off the ground.
Rocco's story could serve as a cautionary tale for boomers who think they'll be
able to fill the gaps in their retirement savings by working longer in their
current jobs. It also illustrates the challenges for those who assume they alone
will determine exactly when they'll retire.
The stark reality is that most of today's middle-age workers who want to
continue working after 60 or even 65 will need to find a new source of income.
While nearly half of baby boomers expect to work past 65, only 13% of current
retirees surveyed this year by consulting firm McKinsey & Co. actually worked
past that age. Forty percent of current retirees were forced to stop working
earlier than they had planned, the survey found. The average age when current
retirees left the workforce: 59.
Boomers have a financial incentive to work past 65. Older boomers can't receive
full Social Security benefits until 66 or later; those born in 1960 or later
aren't eligible until 67. Individuals can start taking partial Social Security
benefits at 62, but if they do, they'll continue to receive a reduced amount for
the rest of their lives.
When retirement comes early
As of 2005, just 60% of 60-year-olds, 32% of 65-year-olds and 19% of
70-year-olds were employed, according to the Bureau of Labor Statistics. Current
retirees cited two primary reasons for quitting sooner than planned:
•Illness. About 47% of current retirees who retired earlier than planned were
forced to stop working because of health problems, according to McKinsey & Co.
Less-affluent retirees were far more likely to cite health problems as the
reason for forced retirement than higher-income workers were, the study found.
"At lower-income levels, many of these people have jobs that require physical
labor," says David Hunt, a senior partner at McKinsey. As they age, some are no
longer able to handle the demands of their jobs, he says.
•Unemployment. Forty-four percent of current retirees who retired earlier than
planned blamed job loss or downsizing. Unemployment was the most frequently
cited reason for early retirement among retirees with more than $250,000 in
investments, the McKinsey study found. "Even at reasonably high levels of pay,
if you're laid off when you're 53 or 54, it's much harder to get retrained and
back in the workforce," Hunt says.
Frank Baker, 57, learned three years ago that his company was laying him off
after more than 12 years as a technology consultant. But to get $20,000 in
severance, he says, he was asked to train his cheaper — and younger —
"I was one of the highest-paid guys, and then I found myself out interviewing
for jobs and being interviewed by people in their late 20s," says Baker, who now
works as a consultant and who believes his age hurt his ability to find new jobs
at the same pay scale.
To test whether age bias is real or imagined, researcher Joanna Lahey sent out
about 4,000 résumés to firms in Boston and St. Petersburg, Fla., and measured
response rates from employers. The results: A younger worker is more than 40%
more likely to be called for an interview than a worker 50 or older, according
to the 2005 study done through the Center for Retirement Research at Boston
Another sobering statistic: The average period of unemployment in 2005 was 24.1
weeks for job seekers 55 and older, compared with just 17.8 weeks for those
under 55, a report by AARP found.
"It's a huge issue, and it really comes down to, 'How do I, the established job
seeker who is 50-plus, how do I establish my differential advantage so it
distinguishes me from my younger counterpart?' " says Damian Birkel, a career
counselor and founder of Professionals in Transition, a support group for the
jobless in Greensboro and Winston-Salem, N.C.
Some frustrated late-middle-age workers have filed age-bias claims.
The federal Equal Employment Opportunity Commission collected nearly $78 million
in settlements involving age-discrimination charges in fiscal year 2005, the
most since at least 1992, when the agency took in $57 million. The EEOC received
16,585 charges of age discrimination in fiscal 2005 and resolved 14,076 similar
Nearly 90% of executives are worried they may soon be discriminated against
because of their age, and more than 60% believe age discrimination has become
more widespread in the past five years, according to a 2005 survey by ExecuNet,
a job search and recruiting network. Most believe age becomes a factor at ages
even below 50. About three in 10 executives fear that age bias could force them
David Ulfik, 55, of Oxford, Ga., who sells analytical instruments, says the
concept of retirement has shifted drastically since his father retired a
generation ago. He's had seven different jobs since turning 40.
When prospective employers check his résumé, Ulfik says, "They see this guy is
55, and they're apprehensive. You see these old-timers at Wal-Mart. Are they
there because they want to be or because they have to?"
He adds, "I think there will always be jobs for seniors who want to remain in
the workplace. Whether they are jobs that they want to work remains to be seen."
Frustrated by the dearth of good jobs, older workers are increasingly becoming
independent contractors or starting their own businesses.
Among workers 50 and older, 16% are self-employed vs. 10% for the overall
workforce, according to a 2004 AARP study. About one-third of older
self-employed workers started their businesses after 50, AARP said.
Self-employment allows older workers to put their years of experience to use. It
usually also offers more flexibility than a traditional job. Fifteen percent of
self-employed workers 51 and older reported having a health condition that
limited the type of work they could do, compared with 8% of salaried workers in
that age group.
Still, older workers who start their own businesses face a serious challenge:
finding health insurance. Only 13% of private-sector employers offer health
benefits to retirees. Medicare doesn't kick in until 65. Private insurance
policies are expensive for older individuals. And some older workers can't buy
insurance at any price.
That's what Richard Rocco discovered after he lost his job. Otherwise healthy,
Rocco was unable to buy a private insurance policy because he has high blood
pressure. He maintained his insurance coverage for a while through COBRA (the
Consolidated Omnibus Budget Reconciliation Act). COBRA lets workers keep their
former employer's group coverage for up to 18 months. But to keep the coverage,
Rocco had to pay $500 a month.
After starting his business three months ago, Rocco was able to buy a group
policy for himself and his sole employee. The cost: about $1,000 a month.
Some analysts, though, see cause for hope. They think job opportunities for
older workers will increase as boomers retire in large numbers.
Employers are expected to face a skills shortage in coming years, and baby
boomers provide a varied and experienced labor pool. Over the 2004-14 decade,
total employment is projected to rise by 18.9 million jobs, or 13%. Over the
previous decade (1994-2004), total employment grew at the same annual rate and
rose by 16.4 million jobs, according to the Labor Department.
Tim Driver, CEO of Wellesley, Mass.-based RetirementJobs.com, a job service for
mature workers, says he's optimistic that employers facing skills shortages will
eagerly welcome experienced workers. While age can be a liability, he says, it
can also be an advantage.
"If you are an employer and your customer base is getting old, you're much
better off having older employees relate and sell to that customer," Driver
says. "Historically, you'd never use retirement and jobs in the same sentence.
Now, it's an everyday expression."
In addition, boomers are more educated than previous generations and more likely
to hold white-collar jobs. "For them, the odds of having to retire early because
of health problems are less than for somebody who has been doing physical work,"
says John Rother, policy director for AARP.
But there are also major hurdles. More experienced workers command fatter
salaries, which some employers will be loath to pay. They're also more likely to
have health problems, which place greater demands on company-provided health
AARP, which advocates on behalf of older Americans, disputes the notion that
older workers are more expensive. A 2005 study conducted by Towers Perrin for
AARP contends that the additional cost of retaining workers 50 and older is
modest, ranging from zero to 3% a year. Those costs are much lower than the cost
of hiring and training new employees, the study said. The study was based on an
analysis of four industries — energy, financial services, health care and
The study acknowledged, though, that companies are slow to adapt to an aging
workforce. Instead of tapping this labor pool, employers may turn more to
outsourcing or push for relaxed immigration rules to fill hiring needs, says
Sara Rix, a senior policy officer at AARP. "Things are changing, and more and
more (companies) will turn to older workers," Rix says. "But age discrimination
does rear its ugly head. If you leave the labor force, getting back is
difficult. Bagging groceries may be all you get."
'Old man on the sales force'
Larry Yoder says he feels lucky. At 62, the Kansas City, Mo., salesman, who
provides books to stores, is one of the oldest on the sales force. He says his
employer values his experience. "I'm the old man on the sales force," Yoder
says. "I can't do what I used to do, but you do what you can do. (Travel) is a
killer on you physically."
He says friends in his age bracket haven't fared as well. Many say they want or
need to stay employed after they hit retirement age. But there's a palpable fear
that well-paying jobs may not exist for them then.
"There's no sense of retirement like my parents had," Yoder says. "You work 'til
you drop. I hear a lot of fear that their bosses are going to let them go."