If you believed everything you read in the newspapers, you might think that working Americans had fetched up in a kinder, gentler age in which they could expect to take one encore after another. One recent “Retirement” supplement, headlined ‘”A Longer Goodbye,” describes how “shorter hours, lighter duties and other perks entice older workers to stay on the job.
The usual Everymen were wheeled out – a benefits manager in Connecticut, a hospital clerk in San Diego, a pharmacist in Cincinnati, each of them contemplating early retirement. “Back in the twentieth century, their companies would have probably sent them off with gratitude and maybe a gold watch.”
But now that baby boomers were starting to retire, the story continued, cutting-edge companies are worried that they may lose institutional memory. So some employers are devising ways to keep the old-timers around in part-time status, so that they can pass along their knowledge to the young.
Doubtless this happens to some people. But special supplements like these are mainly advertising devices – “editorially supported” sections designed to garner advertising, like the regular auto, real estate, employment, fashion and education sections packed into Sunday papers. These sections, sometimes printed as magazines on coated paper, are two-sided markets, meaning that both readers and advertisers pay part of the freight, just like the newspapers themselves, but there is a key difference.
They are written narrowly for the kinds of persons being sought by the advertisers – in this case, Fidelity, Allstate, Wachovia, Vanguard, State Street, Ameriprise. So many of the usual strictures of news-writing – balance, universality, context – don’t apply. Such proliferating “special sections,” full of pap, are further signs of the lengths to which newspapers, deprived of their near monopolies on many sorts of advertising, feel they must go in order to compete with the Web and other ad-delivery systems.
(For a forthright analysis of the ethics and economics of the newspaper supplement business, see this examination of the tradeoffs by Byron Calame, then the public editor of The New York Times.)
As for the complicated matter of how Americans, in particular, are dealing with swiftly-changing expectations of what constitutes a “normal” retirement, a much more reliable guide is Working Longer: The Solution to the retirement Income Challenge, by Alicia Munnell and Steven Sass, scheduled to be published next month by the Brookings Institution Press. Here there is no gauzy portrayal of the joys of elder statesmanship. Instead, there is the bruising reality of the ongoing attempt to shift upwards the entitlement frontier from the once-magical age of 62.
Munnell, director of the Center for Retirement Research at Boston College, is Peter Drucker Professor of Management Sciences there as well. She was a member of the Council of Economic Advisers (1995-97) and Assistant Secretary of the Treasury for Economic Policy (1993-95). Sass is the author of several books, including The Promise of Private Pensions: The First Hundred Years and The Pragmatic Imagination: A History of the Wharton School 1891-1981, They prepared this summary of Working Longer, admirable for its compactness, which EP passes along in its entirety as a service to readers and their parents:
Myth: Given the growing retirement income challenge, people will have to work forever. Reality: If individuals worked full time until at least 66, they could enjoy a long and financially secure retirement, with incomes one-third higher than if they retired at 62.
Myth: Older workers will choose to work longer on their own. Reality: Most people retire as soon as benefits are available at age 62.
Myth: As baby boomers approach retirement, employers will embrace older workers. Reality: Many employers are lukewarm toward retaining older workers due to concerns that they cost too much, lack current skills, and don’t plan to stick around long.
Myth: Employers will quickly change their tune in response to labor shortage. Reality: Many employers with a high proportion of older workers are in declining industries. Others can tap global labor markets
Myth: Older workers have little to offer employers. Reality: Older workers often have advantages over younger workers — including higher productivity, better judgment, a stronger work ethic, and better people skills.
Myth: Phased retirement — shifting to part-time employment with a career employer — is the solution for keeping people in the workforce longer. Reality: Many firms are reluctant to offer phased retirement due to concerns over which workers would be eligible, health insurance costs, and part-time schedules.
Myth: Most workers can work longer by remaining with their career employer. Reality: Career employment is declining fast — only 44 percent of male workers age 58-62 are still with their age-50 employer, down from 70 percent two decades ago.
Myth: The working longer prescription is the answer for everyone. Reality: While today’s older workers are generally healthier and better educated, up to a third could be hard pressed to work into their mid-60s due to poor health or job prospects.
Myth: Government cannot do much to encourage longer work lives. Reality: Raising Social Security’s earliest eligibility age of 62 could push back the work/retirement divide by changing the mindset of both workers and employers.
Myth: Eliminating mandatory retirement removed a major barrier to working longer. Reality: Mandatory retirement could actually promote longer work lives by providing both employers and workers clear expectations about when careers end.
The issue of adjusting attitudes towards the age when it is appropriate to think about knocking off work altogether is, of course, just a skirmish in very complicated challenge. Life expectancy has been increasing for decades while average age of retirement has been steadily falling. A considerable gap in prospective retirement income for most persons has been the result.
Headlines have centered for years on the actuarial imbalances in the Social Security system. If no combination of benefit cuts and tax increases were enacted, ever, the government pension plan – the main source of income for a third of all elderly Americans – would be forced to make substantial cuts in benefits around 2040. A relatively modest series of benefit trims and tax increases could restore actuarial balance, especially if it were enacted sooner rather than later. Meanwhile, employer pension plans are on the wane. And, on average, the tax-sheltered individual saving accounts known as 401(k) plans have been found to be generally inadequate.
Relatively small changes can make big differences in the broader picture, however. Chief among them is the work-longer prescription, especially for baby boomers with little chance to increase their savings. A few extra years in the work force can make a big difference for many persons: more income for longer, higher Social Security pensions, larger 401(k)s with greater appreciation. Hence the emphasis on persuading people to shift their thinking about retirement forward, past the age of 62.
So look for more stories about the benefits of working longer. And stay tuned for further developments early in the next presidential administration. The need to spruce up retirement incomes is hardly a problem that cannot be solved, at least in the aggregate. It’s just one of those things – like the paucity of benches around our city and suburban squares – that we didn’t think about for many years.