Career Extenders challenge traditional views of retirement

Even before the 2020 U.S. Census numbers are released, we know that the American population is continually aging. At the same time, the COVID-19 pandemic has indelibly impacted the economic future of older Americans and their caregivers. As a result, the vision of retirement is changing. The number of people age 65+ in the United States is projected to grow from 56.4 million in 2020, to 82.3 million in 2040 and 98.2 million by 2060.¹

As the aging population grows, so does its representation in the workforce. For a variety of personal and financial reasons, nearly 20% of Americans over age 65 — a total of 10.6 million people — also are either working or looking for work, representing a 57-year high.² Forty percent of workers age 65 or older had previously retired at some point.³ We call this growing and varied group “Career Extenders”.

Although some Career Extenders work longer because they enjoy the stimulation that their careers provide, the focus here is on the group of Americans working past age 65 because they do not have the resources needed to provide retirement income for an increasingly longer life, a situation that the economic impact of the pandemic is making more common. Career Extenders challenge traditional views of retirement by either postponing retirement or retiring from one career and embarking on another.

Adding to increased longevity, the future of many of the public-support systems that past generations relied upon is uncertain, while the cost of providing care is skyrocketing and the interest rate has been low for a prolonged period. The COVID-19 pandemic has amplified the issues facing Career Extenders, bringing with it profound short- and long-term effects on public health and the overall economy.

Two effects of note are:

• Interrupted employment … and retirement savings: The pandemic created immense challenges for both businesses and working Americans. Many individuals experienced reduced hours, salary cutbacks, furloughs and layoffs. Over 30 million Americans reported being unable to work or had to work reduced hours as of July 20204, and older workers were particularly hard-hit. Approximately ⁴ million workers age 55 to 70 were expected to be forced into early retirement due to the COVID-19 pandemic.⁵ As take-home pay decreases, so do contributions to retirement and emergency savings, and early retirement may mean Social Security benefits are reduced due to early filing.
• Quality and availability of long-term care: Recruiting and retaining quality direct-care staff has long been a challenge in skilled nursing facilities, and these problems have been amplified by the pandemic.⁶ These facilities also have lost funding in recent years, while at the same time growing numbers of senior citizens are in need of their services.⁷ Facilities are struggling with staffing and funding, leading to an increased possibility of closing down permanently. In an August 2020 survey of nursing home operators by the American Health Care Association (AHCA) and the National Center for Assisted Living (NCAL), 72% of respondents reported an inability to maintain operations through 2021; 40% said they won’t last another six months.⁸

The cost of care has skyrocketed, with the price tag of a nursing home averaging $100,000 annually. Hiring in-home skilled nursing care is equally out of reach, costing up to $87.50 per hour, leaving many family members and friends to take over caregiving responsibilities themselves ⁹, and those planning for a secure retirement will need to set aside more and more to cover these costs.

Traditional advice urges Americans to begin preparing early for retirement, targeting a goal of 80% of their pre-retirement annual income over a 25 year retirement period, and planning for an annual withdrawal of 4% of total investments.¹⁰ However, that advice misses the mark for Career Extenders who already have missed the opportunity to begin preparing early.

As an alternative solution, special needs financial planning can be applied for our aging workforce’s retirement preparation, emphasizing the use of government benefits in coordination with employee benefits to supplement available assets, putting Career Extenders on the road to retirement using their own, unique roadmap that makes the most of a shorter timeframe to save and extended access to employee benefits.

Access Voya Cares resources for Career Extenders to learn more.