Insights Blog

Working Longer Cannot Solve the Retirement Crisis

February 3, 2021

Brief— Working longer is often proposed as the solution to the retirement crisis caused by older workers’ lack of retirement assets, but new research from SCEPA's ReLab shows this assumption doesn't match older workers' real experiences in the labor market.

Authors: Teresa Ghilarducci, Michael Papadopoulos, Bridget Fisher, and Anthony Webb

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.

Key findings

  • 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.

Read the policy note here.