Working Longer Cannot Solve the Retirement Crisis

Feb 26, 2021 / Amanda Chase, Horsesmouth Assistant Editor

Working longer is often proposed as the solution to the retirement crisis caused by older workers’ lack of retirement assets. Spreadsheet models used by advocates of delaying retirement assume older workers delay claiming Social Security to accrue additional benefits. But in reality, by age 65, most older workers have already claimed Social Security, often to supplement low wages, and working longer does not increase their Social Security benefits. Working longer increases retirement savings significantly less than predicted by spreadsheet models, which don’t reflect older workers’ real experiences in the labor market. Finally, the drastic job loss experienced by older workers in the wake of the Covid-19 crisis reveals the risk older workers face when working longer is the policy substitute for an effective retirement security system.

Working from age 62 to age 70 increases the share of workers financially prepared for retirement by only 18 percentage points, compared to the 46 percentage point increase predicted by spreadsheet models using overly optimistic assumptions. More than two-thirds of the predicted retirement income shortfall is because most older workers claim Social Security benefits and miss out on the Delayed Retirement Credit. More than half (54%) of those claiming benefits while working do so to supplement low wages.

Moreover, the recession put millions of older workers out of a job. Many unemployed older workers are now at risk of never finding another job, a risk they continue to face the longer the economy takes to recover. The purported solution of working longer ignores the effect of the recession by doing nothing for jobless older workers, while deflecting from the need for comprehensive policy reform to ensure retirement security. We detail needed policies to address the retirement crisis:

  1. Reinstate early withdrawal penalties.
  2. Expand Social Security.
  3. Advance older workers’ bargaining power.
  4. Create guaranteed retirement accounts.

You can find the full policy brief from the Schwartz Center for Economic Policy Analysis here.


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