Demographics Are Rewriting Traditional Retirement

For many people, the American Dream has been to own a home and one day retire from their job and live out their days relaxing, traveling and spending time with the grandkids. However, a variety of factors have combined to make those goals less attainable.

According to Zillow data, for example, if you purchase a house today with a 3% down payment, it would take 13 years and 6 months before you could sell it for more than you spent to buy it, taking into account the original price, mortgage interest paid and brokers' fees and other sale costs. (With a 20% down payment, it would take 11 years and 3 months to reach that point.)

Depending on the size of your mortgage and other expenses, your retirement income might not be enough for you to maintain the standard of living you had while you were still working. Almost two in five households are at risk of this, according to a study produced by the Center for Retirement Research (CRR) at Boston College. Some may fall far enough to compel retirees to get jobs to make ends meet.

I reached out to experts at several institutions, including CRR, to find out why workers may need to delay their retirement, what types of jobs are available to older workers and the persistence of ageism in some workplaces — even as America's most powerful and influential leaders are significantly past the standard age of retirement.

Dr. Anthony Carnevale recently retired as the director and research professor at the Georgetown University Center on Education and the Workforce. Carnevale notes that according to data from the U.S. Bureau of Labor Statistics, in 2002, the average U.S. worker was 40 years old. In 2022, the average worker was 41.8 years old, and by 2032, the average worker will be 42.7 years old.

Now, is this a result of Americans being healthier and living longer, so they are, in turn, working longer? Carnevale attributes the aging of the workforce to two factors. One is the combination of a declining birth rate and increasing life expectancy. The other is that the oldest baby boomers have been slow to retire — and their numbers are growing, for now. However, by 2030, all baby boomers will be older than 65 years of age, so they will be eligible to retire. However, Carnevale says the million-dollar question, is will they retire?

A report by the Center of Education and the Workforce projects that through 2031, there will be, on average, 18.5 million job openings a year. "Our findings are similar to those projected by the U.S. Bureau of Labor Statistics: retirements will be a major contributor to these job openings becoming available," Carnevale says. He notes that the sheer size of the baby boomer population means that the number of workers who will be retiring in the coming years will outpace the addition of new labor force participants.

"However, only 58.1% of baby boomers hold retirement accounts (according to Census Bureau data), which may force older workers to stay in the workforce longer," Carnevale adds.

There are, indeed, opportunities for older workers who want or need to continue working. The problem, according to Carnevale, is the bifurcated workforce. "Those employed in the managerial and professional economy are more likely to hold retirement accounts and work in an office setting," he says.

While sitting all day at a desk is associated with health hazards — including being too sedentary and developing eye strain issues — they pale in comparison to the hazards of working in blue-collar and skilled-trades jobs, which Carnevale says are more likely to push workers into retirement. "If those workers are to extend their stay in the workforce, they will need (to learn new skills) in order to remain competitive as technology and automation permeate all corners of the workforce," he says.

And he points to at least two reasons why companies will need older workers to remain in the workforce. "The expected stagnation will come from anti-immigration policies and the lower rates at which women are contemporarily joining the workforce (according to a BLS report) as compared to historic gains." While women have played a role in the post-pandemic labor market recovery, Carnevale says it's unclear if that trend will be sustainable.

Gal Wettstein, a senior research economist at the Center for Retirement Research, tells me that they've issued a brief on whether the jobs of the future will support an older workforce. Researchers used two approaches.

"First, we considered jobs where a high share of current workers is older, and second, we developed an index of age-suitability based on a combination of how susceptible the skills required for the job are to decline with age, the rate of application for disability in the occupation, and the average retirement age in the occupation."

For example, Wettstein says construction jobs are projected to be plentiful — but they are not very suitable for older workers. There are jobs that are more suitable for older workers, but aren't in demand. Jobs that balance suitability and demand — such as managers, market research analysts and computer programmers — are quite amenable to older workers, she says.

And here's something else Wettstein found: "Research on the productivity of older workers finds that they are, generally, as productive as younger workers, but that varies a lot by industry," she says.

Steve Hatfield, global leader for Future of Work at Deloitte, expects the trend of older individuals working past retirement age to intensify. "This is due to longer lifespans and health spans, financial constraints and post-retirement restlessness."

He says that a more mature workforce can offer employers many advantages. "These include their rich experience, strong relationship-building skills and increased loyalty comparatively," Hatfield tells me. "They could also help companies tap into customers from a similar generational cohort, which tends to have substantial spending power."

One problem older workers face is the issue of ageism. "There is definitely evidence that employers discriminate against older workers in hiring," Wettstein says. She believes it could be a concern, especially if the labor market doesn't remain as tight as it is now.

An interesting report by Korn Ferry found that almost 75% of S&P 500 firms have age limits for board directors — usually around 70 years old. This, as America recently voted to pass the country's reins for the most powerful job in the world from 82-year old Joe Biden to 78-year old Donald Trump. What explains this disparity?

"Because of all of the uncertainty during the last few years, there are certain environments where CEOs have agreed to stay longer to move through the dynamics of a changing market and to put the company and the next generation of leadership in a strong position going forward," Tierney Remick, Korn Ferry's vice chair and co-leader of the firm's Board & CEO Services, tells me.

She says that directors are becoming increasingly active in conversations about limits on directors' ages and terms. "One key reason is that there is pressure for boards to become more independent, which is causing them to be more serious about refreshment."

Age diversity is important to bring different viewpoints and problem-solving skills, and Remick explains that older board members who add value can be invaluable in critical or strategic situations. "Our clients are increasingly focusing on strategic, objective assessments of board members, and are having deeper conversations about board effectiveness," she says.

Remick adds that there's a desire to have a good mix of operating executives and corporate governance experts "First-time CEOs want recently retired CEOs around the table, but they also need proven governance experts," she says.

Remick also tells me that she's seeing another trend. When a CEO retires from a large company, they're usually not seeking to be CEO of another large outfit. "They are seeking roles in governance, they are advising investors or applying their time and energy to areas of personal passion," she explains.

Admittedly, people in those types of high-income positions don't usually work past traditional retirement age because of financial constraints.

To help older workers succeed in the workplace, Hatfield believes that organizations should focus on skills. He also recommends building flexible work arrangements while capitalizing on the strengths of older workers. "Investing in reskilling and upskilling can help update mature employees' capabilities in areas like technology, data analytics and digital fluency," he explains. Companies must change their hiring practices to address age bias, and train managers how to lead a multi-generational workforce, he adds.

For older workers seeking to extend their careers, taking a personal inventory of transferable skills that can meet an employer's needs can be useful. "Rather than limiting oneself to previous roles, mature workers should be open to new career directions as well as upskilling and reskilling," he advises.

Also, it's essential to stay current on workplace technology skills — as well as networking to find the right culture fit. "Seek opportunities with schedule flexibility and remote options to accommodate your physical needs," Hatfield adds, "and if pursuing traditional employment remains difficult, encore careers or small-business entrepreneurship can be worthwhile alternatives."

One thing is clear: the future of work will require everyone to rethink ageism. "The experience of mature workers is too valuable to squander through ageist assumptions," Hatfield says. "By modernizing practices, organizations can help older workers thrive and continue contributing now and into the future."

Terri Williams has over 10 years of experience writing about student loans, mortgages, real estate, budgeting, home improvement and business in general. Her work has appeared in The Economist, TIME, Forbes, Architectural Digest and Realtor.com. Read More