Working longer won't save your retirement, expert warns

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2 days ago

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For years, working longer has been promoted as the best way to shore up your retirement — especially if you're behind on savings. A 2018 study even found that delaying retirement by just six months can have a greater impact on financial security than significantly increasing your savings rate.
But economist Teresa Ghilarducci, professor at the New School and author of "Work, Retire, Repeat," argued that this advice, while convenient, masks a deeper problem.
"The working longer consensus was really a convenient untruth," Ghilarducci said in a recent episode of the Decoding Retirement podcast. "The consensus was that ... if people haven't saved for the last 40 years ... when we told them to, at least they have an out and we don't have to do anything about it."
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The root issue, she said, is that the responsibility has been shifted entirely onto individuals. The thinking goes that "since everyone is living longer, then people can clearly live and work longer," she explained. "And since jobs are getting easier, then all people can work longer."
Read more: Retirement planning: A step-by-step guide
But that logic is flawed, Ghilarducci argued, because the premise that everyone is living longer and has easier jobs is false. "And therefore, this idea that we could all just work longer to make up for retirement savings gaps is false," she said.
While it's true that longevity has increased for some Americans, Ghilarducci pointed out that it's primarily those with stable lives, high-paying jobs, and access to quality healthcare.
"Men, and especially white men, have experienced the biggest longevity gains," she said. "So we have a big average increase pulled up by these white men doing good things. But they've also been lucky because they've actually had work careers that lead to longer lives and maybe even a choice to live longer."
For many others, life expectancy has stagnated. White women, for instance, have seen little to no improvement, in part, she said, because they are working more.
"Working actually isn't that good for you," she said, adding that oftentimes, the benefits of working longer depend on whether an individual is "part of the elite."
For the privileged few, work might make them healthier and keep their minds sharp, especially if they control the pace and content of their jobs, Ghilarducci said. But only about 11% of workers have that kind of autonomy.
"The rest, 89% of people, have jobs that if they continue them would actually hasten death by causing more anxiety and cortisol [a stress response] because work and commutes, especially if you aren't the boss, can create higher levels of cortisol."
And chronic stress, she noted, is especially harmful in older age.
"Women in service-related jobs who are working past 60 are especially vulnerable to having their jobs create more illness, more morbidity, and a shorter lifespan," Ghilarducci noted.
The retirement dilemma
This presents a dilemma. On paper, working longer boosts retirement income — and in many cases, it's a rational choice.
But Ghilarducci warned that "most of us don't even have a choice to work longer, even if we don't have enough money to live on in our old age."
So what can people do? If you're in your 50s or 60s, she recommends a financial reality check. "You have to look at your own finances, and you have to be realistic about how much you need," she said.
Start by estimating your expected retirement income and subtract 20%. Then, estimate your expenses and add 20%.
If there's a gap, Ghilarducci recommends trying to work longer, if possible, cutting expenses, and consulting a fee-only financial adviser. Tools like AARP's retirement calculator can help.
And don't forget that programs like Social Security, Medicare, and Medicaid are key financial assets.
"The government becomes your most important financial partner as you age," she said.
The Gray New Deal
According to Ghilarducci, instead of relying on individuals, the government needs to take a bold new approach: a "Gray New Deal."
She explained that, just as FDR's New Deal addressed the needs of workers and the unemployed, today's policies must support a large and growing population of older adults — many of whom are being pushed out of the workforce or retiring without enough savings.
"It is absolutely a failure to say, 'Well, those people should just have saved ... or those people can just work,'" she said. "Those are ... just unrealistic kinds of fantasies and hope. That's not a plan."
A Gray New Deal doesn't mean forcing everyone into retirement. "If older people want to work, we absolutely should not have age discrimination," she said. "Go work."
But, she added, those jobs need to be better by offering union protections, safety standards, and workplace accommodations that reflect the realities of aging. That also includes curbing digital surveillance and managing job stress.
At the same time, Ghilarducci emphasized that many people either can't or don't want to keep working, and they deserve the right to retire with dignity. "So retirement should be made decent," she said.
A key part of the Gray New Deal, she said, involves strengthening Social Security, not cutting it. That includes increasing revenues and possibly even raising benefits.
"A $200 across-the-board increase in monthly benefits isn't unreasonable," she said. "It's probably actually required ... if we want to bring our senior poverty rate — currently around 23% by global standards — down to a more acceptable level."
Read more: When will I get my Social Security check? Payment schedule for 2025.
Another pillar of Ghilarducci's plan is the creation of a Guaranteed Retirement Account, or GRA, which would be designed to supplement, not replace, Social Security.
The GRA would ensure universal retirement coverage, particularly for the half of workers who currently don't have access to a retirement plan at work.
Workers would automatically contribute 1% of their salary to the GRA, and the government would match it with 3%. Contributions could increase over time — up to 5%, with continued government matches. Workers would retain ownership of the account and choose how to invest, and the plans would be managed by a nonprofit public entity — likely the federal government.
"We need to make sure that people are covered 100% when they work, just as they are with Social Security," she said.
While the GRA is not currently in bill form, Ghilarducci pointed to the Retirement Savings for Americans Act (RSAA), a bipartisan proposal that shares several core features. Supporters of the GRA concept include AARP, many unions, and firms like Vanguard, Fidelity, and Charles Schwab.
But one group remains opposed: brokerage industry lobbyists.
"There's a noisy group that does not support it,' she said. "Almost everybody is for it, especially small employers. So I think it's just about focus and attention. It's really not about politics."
Got questions about retirement? Email Robert Powell at [e-mail], and we'll do our best to answer it in a future episode of Decoding Retirement.
Each Tuesday, retirement expert and financial educator Robert Powell gives you the tools to plan for your future on Decoding Retirement. You can find more episodes on our video hub or watch on your preferred streaming service.
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