Working in the Golden Years: Plan B for Retirement?

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Recent studies indicate that an increasing number of employees expect to continue paid employment to make ends meet during their retirement years. Can paid employment be an important component of a secure retirement plan?

An increasing majority of today's workers plan to work in retirement to make ends meet. In fact, according to a study by the Employee Benefits Research Institute, fully 70% of workers surveyed in 2010 plan to continue to work at least part time in retirement. In 1998, only 56% of all workers provided the same response. The increase may be explained in part by the impact of the recent financial crisis on workers 401k portfolios, but in fact the shift in expectations has been very gradual over the years, with only a slight spike in 2008 and 2009 as a result of the stock market collapse.

The same study by EBRI casts doubt on the viability of these workers plans. In stark contrast to the 70% of current workers who plan to remain employed during their retirement years, only 23% of current retirees are actually working for pay in retirement in 2010. In 1998 the percentage was virtually identical at 22%.

People also expect to work longer before retiring. In 2000, the study found that only 20% of workers age 55 or older expected to retire at age 66 or older. In 2010, 42% of these workers expected to continue working full time until at least age 66.

James Kinney, an independent Certified Financial Planner™ and owner of Financial Pathways, a Bridgewater NJ based financial planning firm (, shares doubts about the viability of retirement plans that rely on individuals working for pay. “It is very easy for a 45 or 50 year old to say that they don’t need to save as much because they don’t plan to stop working, but it is simply not realistic. As people age, their ability to compete with younger workers diminishes, making it harder to land good paying jobs. Health also becomes unreliable; many people will find that they are physically unable to keep working due to health problems. Planning to work part time for supplemental income in retirement is reasonable, and many retirees find that work can be rewarding, but a solid retirement plan should never rely on the individual’s ability or desire to continue working in order to pay for basic living expenses. It just introduces far too much uncertainty into the plan.”

A shortfall in savings combined with continued erosion in confidence in the Social Security system may both be factors behind the diminished expectations of today’s workers. According to the EBRI, In 2000, 27% of workers age 55 or over surveyed by EBRI felt that they had enough money to live comfortably throughout their retirement years. By 2010, only 13% shared this opinion. In 2000, 17% of older workers expected that Social Security would continue to provide a stable level of benefits. By 2010, this already low confidence level had further shrunk to just 12%.

“Many baby boomers may be relying on their ability to continue earning a living because they feel thay have little choice.“ suggests Mr. Kinney. “Many did not really start to save for retirement in a meaningful way until they reached their 50’s. By the time they started to take saving for retirement seriously, it was almost too late to accumulate the sums needed, especially as many found any attempts to save more offset by investment losses during the 2008 and 2009 market collapse. With little faith in their ability to accumulate the savings needed, and with even less faith in the Social Security system, it is only natural that people turn to the last straw – their own ability to continue working and earning a living.”

While it is understandable that workers may hope to continue to earn a living in retirement, Mr. Kinney suggests a reality check may be in order. “Although many 50 year olds seem to embrace the idea of working through retirement, I find the concept seems to meet with much less enthusiasm among 75 year olds. Unfortunately there is no alternative to old fashioned financial discipline. An aggressive approach to saving for retirement is still the one and only way to ensure a secure financial future for you and your loved ones.”

Sources: Employee Benefit Research Institute, 2010 Retirement Confidence Survey.

About James Kinney and Financial Pathways: Financial Pathways provides advisory services through Creative Financial Designs, Inc., a Registered Investment Adviser. Securities are offered through CFD Investments, Inc., a registered Broker/Dealer, Member FINRA & SIPC, 2704 South Goyer Road, Kokomo, IN 46902 (765) 453-9600. Financial Pathways is neither a subsidiary of or controlled by CFD Companies.


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