Work at 65 Years Old. Might Not Be Too Old

Tuesday, April 24, 2018
Fatou Darboe

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Collecting social security and a bus pass at 65 typically marks the end of middle age and the beginning of twilight years.

However, various research studies suggest that old age really starts at 74, with middle age extending at least nine years longer than current estimates.

Baby boomers are perfect evidence for those studies: they are not retiring at 65. In 2017, 32 percent of Americans between the ages of 65 and 69 were employed. Indeed, an increasing number seniors are refusing to retire.

Older Americans are also working more while those under 65 are working less. That is a trend that the Bureau of Labor Statistics (BLS) expects to continue, according to Bloomberg.

The BLS projects that by 2024, 36 percent of people between the ages of 65 and 69 will be active in the labor force – a 22 percent increase since 1994.

Why is that?

Perhaps because life expectancy is much higher? Older people are healthier and fitter than ever? Maybe they love their jobs too much to quit?

Let’s look into it.

65 Years Old Might Not Mark Old Age

Researchers from the International Institute for Applied Systems Analysis (IIASA) in Vienna, Austria, suggest that old age should not be measured by age but should instead be measured by how long we have left to live.

In the 1950s, a 65-year-old American could expect to live a further 14 years. However, today’s baby boomers are expected to live way longer after retirement – about 20 years more.

Researchers state that old age should perhaps be defined as having 15 or fewer years left to live, which for baby boomers, means that they’re middle aged until about 70 or more years of age.

“If you don't consider people old just because they reached age 65 but instead take into account how long they have left to live, then the faster the increase in life expectancy, the less aging is actually going on,” said Sergei Scherbov, World Population Program Deputy Director at IIASA.
Image credit: United Nations

“Older people in the future will have many characteristics exhibited by younger people today.

“What we think of as old has changed over time, and it will need to continue changing in the future as people live longer, healthier lives. 200 years ago, a 60-year-old would be a very old person. Someone who is 60 years old today, I would argue is middle aged.”

So a 60-year-old today should be considered middle aged. Interesting, in various ways, particularly for policy makers.

Marking the point at which old age begins is important for policy makers as it is a marker of increased disability, dependence and decreased labor force input.

Image credit: Financial Times

That is the reason why many governments around the world are predicting and preparing for a retirement or pensions black hole as an increasing number of workers around the world retire and dig into savings pots.

Furthermore, an amalgamation of falling birth rates and increasing lifespans will increase the old-age dependency ratio (the ratio of people aged 65 to those aged 15-64) from 12 percent in 2015 to 38 percent by 2100.

SDN-Shrinking Pops.chart2
Image credit: World Economic Forum

The early increases in life expectancy can largely be attributed to lower deaths among infants and children (due to improvements in public health and basic hygiene) as opposed to people living longer.

From the beginning of the 20th century, survival rates in old age started to tremendously improve, especially in the first world. The trend still continues today.

Life spans have also been increasing recently. Prior to the 1960s they seemed to be fixed at 89 years, but have since increased by eight years due to medical advances.

According to the United Nations, between 2010 and 2015, the number of people over the age of 85 around the world will grow twice as much as the over-60s group, and 16 times as much as everyone else.
Image credit: United Nations

That projection could lead to labor shortages, asset-market meltdowns, economic stagnation, fiscal pressures and innovation scarcity.

16 percent of GDP in the rich world is already spent on pensions and healthcare and is projected to rise by 25 percent of GDP by the end of the century, according to the IMF.

Let’s refer back to the IIASA research.

The researchers argue that 65-year-olds today are healthier and less dependent on others than before. They are also more mentally lithe than ever before; and that economic projections should factor that in.

Professor Alan Walker of the University of Sheffield states that old age now starts much earlier than traditional valuations and that there is great disparity in low long people could expect to live for.

He says that many people believe that 70 is the new 50 and that that connotes a silent revolution that has been taking place in longevity. Society is yet to catch up with the new demographic reality, especially in the labor market.

That is especially true in countries, like Japan, that are grappling with shrinking populations and an aging workforce.

The Case of an Aging Workforce: Japan
Image credit: World Economic Forum

In Japan, a lot of companies are planning to raise the retirement age of their workforce in order to help ease the country’s labor shortage and use the skills of veteran workers.

Most Japanese companies have a retirement age of 60 years with an option of an additional five years’ work with reduced pay and special terms.

That system is the foundation of Japan’s traditional jobs-for-life work structure where workers are guaranteed employment from graduation to retirement.

However, both a dwindling and aging population is forcing Japan to change. The percentage of the population that is 65 and older in Japan is projected to rise from 27 percent to 38 percent in 2065. In 2015, a senior citizen was supported by 2.3 workers but the ratio is expected to change to 1:1.3 by 2065.

In light of such projections and labor market demands, the Japanese government now intends to raise the retirement age to 65 by 2020 in order to leave more people in the labor force; and decrease the pressure on a withering tax base and a rising social welfare bill.

Japanese companies like Suntory Holdings and Aeon Co Ltd recently raised the retirement age to 65 for employees who are happy to keep working. And we could see more companies following suit.

Especially since Japanese citizens are taking to the streets and parliament to campaign age definitions and limitations.

Doctors in Japan are campaigning to raise the definition of senior citizens from 65 years of age to 75 years and older.

One of the campaigners said that the traditionally accepted age of 65 is outdated and needs to be increased to account for longer life expectancy and changing social attitudes towards ageing.

Dr. Yasuyoshi Ouchi, former chairman of the Japan Geriatrics Society said that, “those who feel that they are still healthy when they reach 60 or 65 are forced to retire, and that means those who are used to supporting others become those who need to be supported by others instead.

“We think this kind of treatment is so outdated.”

Under the campaign proposals, people between the ages of 65 and 74 should be deemed “pre-old age” while those over 75 should be deemed “old age.” And people who are passed 90 years of age should be called “super-old.”

People often panic or hold a negative view of Japan’s aging workforce. However, some people, like Ouchi, sees an exciting future for Japan.

A future in which older people are empowered to contribute positively to the economy and society if they still have the aspiration and aptitude to do so.

Numerous studies agree with him. One such study is by Warren Sanderson of Stony Brook University.

Age is Nothing but a Number

The study by Sanderson states that if old age is fixed at a certain point, then the proportion of old people will increase because of increasing life expectancy.

However, if the threshold for old age is moved to take into account longer life expectancy, then the proportion of old people falls over time so that being old at 70, 20 years prior, would actually mean that its younger now.

Sanderson argues that since people are living longer and healthier lives, age shouldn’t just be a number we reach but a reflection of the life we lead.

Indeed, people today are working longer and much later in life, which according to a study, has its own mental and physical benefits.

The study suggests that retirement increases the likelihood of suffering from clinical depression by 40 percent and also increases the likelihood of having at least one diagnosed physical condition by 60 percent.

They also found that those who were over 70 and still working were more mentally alert than their non-working counterparts.

Employers also found that having older workers led to increased productivity and reduced downtime due to errors.

And Older Americans are Working Longer and Harder than Ever

About 19 percent of people above the age of 65 were working at least part-time in the second quarter of 2017. The employment/population ratio of that age group hasn’t been that high in 55 years, since American retirees got better healthcare and social security benefits in the late 1960s.
Image credit: Bloomberg

Among the many factors that are keeping senior American citizens in the workforce, a key factor may be that many are living longer and healthier lives than the previous generations.

Peter Elwood at Cardiff University conducted a ground-breaking 35-year study which shows that living a healthy lifestyle greatly reduces the risk of cancer, diabetes, heart attack, stroke and dementia.

Elwood said that older people are becoming healthier and fitter, well into their 80s.

Others do not want to retire because they love their jobs and want to stay mentally alert and physically active. Some need the money, as the longer one works, the more affordable retirement is.

Whatever the reason is, factors that go into retirement are many and require a lot of thought. If 65 is no longer the optimal retirement age, when should you retire?

Retirement Considerations

Some people love their work so much that retirement is not something they think about or even consider. Some want to retire as soon as possible.

Indeed, the optimal age for retirement varies by person.

There are many factors that go into deciding when to retire. Here are three basic rules that people typically use in deciding when to retire:

They know what they will do after they retire

The most important step in determining when one should retire involves figuring out what to do after one retires.

A 2012 study by Elizabeth Mokyr Horner showed that a lot of retirees experience a sugar rush immediately after retirement, but the feeling quickly fades and is followed by a substantial decrease in quality of life.

People become bored if they don’t have plans for what they’ll do after retirement. Whether it be playing golf, travelling or consulting, the goal is to keep active and happy.

And lot of retirees go back to work in some capacity because they want to.

According to a Merrill Lynch survey of retirees in 2014, 80 percent of retirees chose to work even though they didn’t have to.

The top reason they continued working was to stay mentally active. And the second reason was to stay physically active. Those two reasons are seen as essential to retirees’ happiness.

They know they can afford to retire

One needs to assure that their financial assets will be able to maintain them during retirement, regardless of when they decide to retire. And some people’s retirement age will be decided solely by money.

Most people need 70-80 percent of their current income in order to maintain the same standard of living in retirement. And they typically withdraw about four percent of their retirement savings annually in order to avoid running out of funds.

Those aren’t the standard rules though. Inflation, interest rates, investment returns and quite a number of other variables will affect how much one can use or withdraw each year.

Health matters

There are many reasons why people factor their health into retirement decisions.

The first reason is the financial impact. According to Fidelity, a 65-year-old couple retiring will spend $245,000 on healthcare during a 20-year retirement period. That figure does not include long-term care expenses, which can be huge.

If one retires before 65 years of age, their healthcare expenses could be even higher. That is because they will most likely have to pay for health insurance on their own unless their employer provides coverage for retirees.

The second reason people are forced to retire earlier than they would like is because of health issues.

A 2017 Employee Benefit Research Institute survey found that 46 percent of retirees in 2016 retired earlier than expected. Over 50 percent of them retired early because of health problems or disability.

But even if one currently does not have health issues, delaying retirement for too long could take a toll on the body.

Wrapping Up

If you’re over 65 years of age, reading this, and still in the workforce, you are not alone.

More and more “seniors” are staying in the workforce. And the number could be higher if more seniors were either healthier or had better job opportunities.

And some governments are making strides towards decreasing the pressure on labor market constrictions.

What governments, like Japan are doing, in addressing the fiscal demands of shrinking populations, is to look at bold reforms.

They indeed need to think about the changing population dynamics, workplace requirements and economic demands; and review what they can afford in the long term.

They should also listen to 65 year olds who are more than happy and willing to keep working.