7 Reasons Most Baby Boomers Should Keep Working Longer

Though not necessarily full-time

The age-65 retirement age is purportedly based on a pension plan initiated by Chancellor Bismarck in Germany in 1889. In fact, the German pension plan originally set the retirement age at 70 and lowered it to 65 in 1916, 27 years later. The United States adopted 65 as the retirement age with the creation of the Social Security system in 1935.

Life Expectancy Isn’t What It Used to Be

Both in the Germany in and the United States in the first half of the 20th century, few people made it to age 65, and most of those who did survived only a few years beyond that age. Life expectancy in Germany in 1916 was just 47. Today it’s 81. Life expectancy in the United States in 1935 was 61 years as compared to 79 today. (German life expectancy, which trailed that in the United States for most of the 20th century, caught up by the end of the century and has continued to pull away from ours in the 21st century.)

Today, most Americans — 76% of men and 86% of women — make it to 65 and then are likely to live another two decades. (Interestingly, while women are significantly more likely than men to make it to age 65, those who do have only a three-year longer life expectancy than men of the same age, 21 years as compared to 18 years.)

The “Dependency Ratio”

The change in demographics is one of the main reasons the Social Security system is out of balance. We now have a higher proportion of retirees receiving Social Security benefits as compared to workers contributing to it than we’ve ever had in the past, and the imbalance will only increase as more baby boomers retire and begin drawing on Social Security.

Economists calculate the so-called “dependency” ratio of working age to elderly members of countries. Working age for many of these calculations starts rather low, at age 15, and elderly is set as starting at age 65. (Some calculations distinguish between younger dependents and older ones, but most include both in a single calculation.) In the United States due to aging of the baby boomer generation the dependency ratio grew from 49 in 2010 to 54 in 2019, meaning that during those nine years for every 100 Americans of working age, there are six more dependents.

(The OECD calculates a similar figure, the “old age support rate,” which is the number of workers for every retiree, using ages 20 to 64 for the working age population. In 2011, it projected that the old age support rate in the United States would decrease from 4.7 workers for every retiree in 2008 to 2.6 workers for every retiree in 2050.)

To rectify this imbalance to some extent, in 1983 Congress voted to gradually raise the full retirement age from 65 to 67. In addition, Social Security includes other features designed to encourage workers to begin taking benefits early, including a reduction in benefits taken before full retirement age and an increase in those paid to retirees who delay receiving benefits after reaching their full retirement age up until age 70. But since there has been no adjustment for four decades, the Social Security trust fund is predicted to run out of money in 2033. (This doesn’t mean that beneficiaries would lose their benefits entirely then. Instead, it will become an entirely a pay-as-you go system and retirees would receive approximately three quarters of what they’re entitled to.)

This leads us to the first of seven reasons baby boomers should postpone retirement.

1. Saving Social Security

All these numbers would look much better if the retirement age was set at 70 rather than 65. By moving tens of millions of Americans from the dependency side of the ratio to the working side, the numbers will work much better. (It’s hard to find the exact number of Americans between age 65 and 69, but the Census Bureau breaks out those between 65 and 74, reporting that there are now about 33 million younger seniors.)

2. Shoring Up the Workforce

One of the reasons we’ve had a low unemployment rate since coming out of the Covid pandemic and it’s likely to stay low for the forseeable future is that a lower percentage of Americans will be working age. The U.S. Bureau of Labor Statistics projects that while the U.S. population 16 and older will grow 26% from 256 million in 2020 to 322 million in 2050, those between 16 and 64 will only grow 18% from 204 million in 2020 to 241 million in 2050. The result will be an ongoing shortage of workers unless more older Americans stay in the workforce (or we increase immigration rates).

While postponing retirement would improve the dependency ratio and shore up the declining American workforce, it would also have many personal benefits for baby boomers, including:

3. Maximizing Social Security benefits

For every year before age 67 that a baby boomer takes Social Security retirement benefits, they will lose 6% for the rest of their lives. For every year they postpone taking benefits from age 67 to age 70, their monthly payments will be 8% higher for the rest of their lives. Of course, they will be giving up the payments for the years in between, but by age 80 in most cases they will have recouped the lost income and will then have higher income for the rest of their lives. Unfortunately, as I’ve commented before, those who most need the higher payments are the least likely to delay taking their Social Security given that higher earners are more likely to be healthy enough to continue working and have jobs that are less physically demanding.

4. Necessary income

The combination of the elimination of traditional pensions for non-public workers and lower wage levels for all but the most affluent Americans, means that few baby boomers have enough money for a comfortable retirement, whatever decision they make regarding when to begin taking Social Security. Working longer has several financial benefits, including:

• More money earned and saved.

• Postponing the need to draw down savings, meaning both that savings will be invested and grow over more years and that they will be drawn down to pay for retirement over fewer years.

• Enhanced Social Security benefits both due to the incentives described above for postponing retirement until age 70 and the added quarters on which the Social Security benefit is based.

Even those with sufficient savings and income to pay for a comfortable retirement may be advised to save up more to cover the cost of potential care needs, a tidal wave that can easily swamp any otherwise stable retirement plan.

5. Purpose

Doing useful work enhances one’s sense or self worth and satisfaction with life. Even if you are fortunate enough not to need to work for financial reasons may well choose to work or volunteer for these reasons and those that follow.

6. Combating loneliness

One of the scourges of old age can be loneliness as seniors lose partners, family members, and friends. These losses are often compounded by physical decline that can make it harder to get around or to drive. Going to a job or volunteer activity can help alleviate such isolation.

7. Health

It’s hard to know which way the causation arrow goes, whether more active people are healthier or healthier people are more active. But since any physical activity enhances health, going to work should help.

None of this means that anyone should stay in a job they hate or they simply no longer enjoy. It also doesn’t mean that everyone needs to work full-time. Even part-time work can provide all the benefits described above. A lawyer may be perfectly happy taking orders in a coffee shop, an accountant repairing bicycles, and a nurse teaching children at an after-school program.

Do what feels right for you, but (to borrow the Nike slogan) just do it.