Rethinking Retirement Strategies: The Limitations of Working Longer for Maximized Benefits

Elongating one’s working years to optimize Social Security benefits might be a compelling retirement strategy. Continuing employment can enable individuals to maximize their eventual benefit, persist in saving for retirement, and circumvent the need to tap into investments for daily expenses.

However, a significant obstacle emerges: this extended employment option is infeasible for most of the population. The information was revealed in a book titled “Overtime: America’s Aging Workforce and the Future of Working Longer.” The book was edited by Lisa F. Berkman and Beth C. Truesdale and published by Oxford University Press.

The editors point out that, despite today’s middle-aged adults being less financially prepared for retirement than their retired counterparts, delaying retirement proves inadequate as a solution. Factors such as precarious work conditions, responsibilities related to family caregiving, declining health, and age-related discrimination create substantial barriers that render it difficult or unattainable for a considerable segment of the population to extend their working years.

Statistics from the Social Security Administration support this notion. While nearly 13% of individuals nearing retirement express intentions to delay claiming benefits for a larger payout, a mere 5% wait until age 70 to claim benefits. Instead, approximately one-quarter of men and one-third of women opt to begin collecting benefits as soon as they are eligible at age 62.

Adding to the complexity, the administration’s data also underscores that more than one in eight individuals currently 20 years old will not live beyond age 67.

Despite these challenges, financial advisors continue to endorse deferring benefits to maximize overall gains. The concept seems logical: postponing benefits from the full retirement age of 67 to 70 results in an annual 8% increase, culminating in a 32% boost in benefit payments. In addition, having a higher initial Social Security benefit means that any adjustments made for inflation will be more significant, resulting in a larger payout for cost-of-living increases.

The Dilemma with Prolonging Employment

A National Bureau of Economic Research published in 2024 pointedly observes that “Americans are notoriously poor savers, with many reaching old age lacking the financial means to fund retirements that could potentially span more years than their active working lives.” The report proposes that nearly all American workers aged 45 to 62 should delay claiming benefits beyond age 65, with over 90% advised to wait until age 70.

Although working more to increase retirement income may seem like a good idea, the editors at “Overtime” highlight five specific factors that actually make this approach less effective. These factors include trends and disparities in demographics, health, family dynamics, job opportunities, and political influences—elements often overlooked in discussions of extended work.

The editors advocate for a spectrum of potential solutions. They argue that implementing strong retirement and disability policies is crucial in conjunction with policies that encourage longer working years. Moreover, they assert that robust “good jobs” policies must synergistically bolster successful extended work policies.

In Summary

Although extending work and postponing retirement stands as a common recommendation for individuals financially unprepared for retirement, a fresh perspective from Lisa F. Berkman and Beth C. Truesdale’s book challenges the feasibility of this alternative for a substantial portion of the populace. Increasingly challenging work conditions, caregiving commitments, health issues, and age-based discrimination collectively make it progressively harder for older Americans to sustain their participation in the workforce.