The Case to Keep Working Past Retirement Age

“I’m fortunate that I’m not working for the money,” says Levine, now 76. “I’m working for the structure and the camaraderie of women I work with and the customers.” Levine spends most of her pay on clothing at the boutique.

Continuing to work past retirement age as Levine is doing has many advantages. It allows people to spend more from their nest eggs when they do fully retire. Social Security benefits rise substantially when you delay benefits.

Some of the most important benefits aren’t financial but physical and mental. People that keep working tend to live longer and have lower rates of dementia.

That isn’t to say everybody should keep working. Many people have grueling or unpleasant jobs, and they simply aren’t able to work or don’t want to.

On top of that, a lot of Americans without adequate retirement savings have little choice but to keep working past normal retirement age. About half of Americans don’t save enough for retirement, experts calculate.

Employment rates for seniors have been trending up. In 2022, 26.6% of Americans ages 65 to 74 were working, up from 20.4% in 2002 according to the U.S. Bureau of Labor Statistics. Among those 75 and older, 8.2% work, up from 5.1%. Labor participation rates are projected to keep rising for both groups.

Working past retirement age isn’t an all-or-nothing proposition. You might want to continue at the same job but work less hours or, like Levine, you may opt for a lower-paying, part-time job.

“We encourage people to keep working,” says Levine’s financial advisor, Ed Gjertsen of Northfield, Ill. “Retiring and playing golf all the time is a little taxing. Working at a golf course is a different matter.”

Another of Gjertsen’s clients does exactly that. Jim Murphy, 70, of Glenview, Ill., works at the municipal golf course in the summer and at the municipal gym in the winter.

Murphy, a retired salesman for a packaging company, earns about $500 a month and says even that helps a bit in retirement. Mostly he enjoys the contact with other people that work brings him.

“I see new people, meet new people, joke around with the guys,” says Murphy. “It’s interesting to be part of it.”

Here are four reasons you should consider working into your late 60s or 70s.

1. It Takes Pressure Off Your Finances

Each year you work is another year to save money instead of spending down your portfolio.

“You gain two ways,” says John Crowell, 67, of St. Augustine, Fla., who began working as a real estate agent after he sold his business and retired as an insurance agent. “The money is growing, and the years are shrinking.”

The math is powerful. If you retire at 62, you can expect to spend about one year in retirement for every two in the workforce, notes Alicia Munnell, director of Boston College’s Center for Retirement Research. If you retire at age 70, you will spend approximately one year in retirement for each four as a worker.

“I have advocated for a long time that people work as long as possible,” says Munell, who is 80 herself and plans to work another couple of years.

2. Your Social Security Benefit Will Keep Growing

If you delay collecting Social Security benefits to age 70 from age 62, your monthly check will grow by at least 76%. Because of the way Social Security calculates benefits, it could grow substantially more than that. Your benefits are based on your 35 top salary years after adjusting them for inflation to when you turn 60.

If you haven’t worked 35 years, or you had some years where you earned very little, your benefit will grow even more rapidly. Because Social Security calculates benefits based on average wages the year you turn 60, many workers will permanently increase their monthly check by working past 70 as their salaries naturally rise with inflation.

Mike Piper, a St. Louis certified public accountant who created a free website for maximizing benefits, computed benefits for a hypothetical 62-year-old worker who maxed out her Social Security contribution in 20 of her 35 working years. In the other 15 years, she earned between 50% and 90% of the Social Security earnings maximum.

If she retired today at 62, she would receive $2,347 a month adjusted for inflation for the rest of her life. If she kept working and waited until her full retirement age of 67, she would get $3,538 a month in today’s dollars. And if she waited until 70, she would get $4,516.

But even if she started her monthly benefits at the maximum age of 70, she would receive a small increase each year in her monthly benefits by continuing to work full-time. By age 75, Piper calculates it would rise to $4,748—a permanent boost of 5% over her benefit at age 70. If she kept working to age 80, it would rise to $5,014—a boost of 11% over age 70. Piper assumed 3% annual wage inflation for this example.

3. It’s Good for Your Health

Research has found that working longer is associated with increased longevity and decreased dementia. A 2020 Lancet study on dementia noted that countries with earlier retirement ages have increased dementia rates.

Depending on the work you do, you may get considerable physical activity, which is good for your health. But even in sedentary jobs, you will be using your mind, which helps ward off dementia.

“It provides structure for your day,” Boston College’s Munnell says. “It keep you engaged and mentally active.”

The very act of getting up each morning and going to work can be a sort of fitness routine. Commutes often involves some exercise. If you’re working in a large office building, you tend to walk more than at home.

4. Work Increases Social Interactions

People are social creatures and isolation can take a toll. Many jobs involve dealing with other people, which is good for you.

“Having consistent interactions with people is actually keeping your brain wired more to fight depression and dementia,” says Carolyn McClanahan, a Jacksonville, Fla., financial advisor who is also a medical doctor. Crowell, the real estate agent in St. Augustine, is among her clients.

Working longer is also good for marriages, McClanahan says. “A lot of couples don’t plan for what happens when they’re both not working.”

She goes on: “Every body needs time away for other friends, to be by themselves. Sometimes when one spouse is no longer working, they make more time demands on the other spouse.”

McClanahan says spouses can spend too much together. “If spouses are spending 24 hours a day together, if one of them dies, that leaves the other devastated.”

Write to Neal Templin at neal.templin@barrons.com