Quitting work in retirement? Fuhgeddaboudit!

If you’re one of the many American workers who’s considering quitting work in retirement, a word of advice: “fuhgeddaboudit!”

After working for decades, many Americans eagerly look forward to their retirement years without the need to work. However, this desired retirement is an unlikely outcome for many American workers.

Stated simply, quitting work at typical retirement ages is not an option for most Americans because they simply can’t afford to. As one American comedian remarked about his financial preparedness for retirement, “I’ve got all the money I’ll ever need if I die by four o’clock.”

For Americans born after 1960, Social Security payments begin at age 67 with full benefits, and at ages 62 to 66 Americans receive reduced benefits. If one retires at age 62, for example, the monthly Social Security benefit received is 70 percent of the full benefit provided at age 67.  

Monthly benefits can be maximized by waiting to begin taking them at age 70. Social Security adds an 8 percent delayed retirement credit to the eventual monthly benefit for each year delayed up until age 70. As a result, the monthly Social Security benefit started at age 70 is more than 75 percent higher than the benefit started at age 62.  

However, despite the higher monthly benefits, just one in 10 non-retired Americans aged 45 and older plan to wait until age 70 to begin taking their Social Security benefits. The average retirement age for Americans is 64 years, with men at age 65 and women at age 63.  

Non-retired American workers, on average, say they will retire at age 66, which is one year after Medicare becomes available unless one has a qualifying physical condition. At age 65, the average expected additional years of life for an American is nearly 18 years for men and slightly more than 20 years for women.

A majority of American workers, close to two-thirds, believe they would be forced to work past the age for Social Security full benefits out of financial necessity. Working beyond retirement age would be required to maintain current living standards throughout old age.

Most Americans have saved relatively little for retirement. A 2019 survey, for example, found close to half of all respondents had no money put aside for retirement. Another 19 percent said that they’ll retire with less than $10,000 in savings. If those trends continue, approximately two-thirds of Americans will reach retirement age essentially broke.  

The envisioned three-legged stool for retirement was to be made up of personal savings, worker pensions and social security benefits. As most Americans have little personal savings and few have a company pension, many are relying on a single leg of that stool, namely Social Security benefits. 

A fifth of married couples and nearly half of unmarried persons rely on Social Security for 90 percent or more of their income. In 2021 the average retired American receives a monthly Social Security benefit of about $1,554, with about 65 million Americans receiving a monthly benefit, totaling over one trillion dollars in benefits during the year. 

About 50 percent of Americans report that they will struggle, or are currently struggling, with their personal finances needed to maintain their standard of living once they stop working. Also, millions of Americans who have worked for years receive Social Security benefits below the poverty line, which is $12,880 annually. The Biden administration has proposed raising the minimum Social Security benefit to 125 percent of the federal poverty level, or approximately $16,100. 

Among those aged 65 years and older the proportion in the labor force varies markedly across countries. The average for OECD countries in 2019 was 16 percent, with considerably lower levels in many European countries, including Spain (2 percent), France (3 percent), Italy (5 percent), Russia (7 percent), and Germany (8 percent). 

In contrast, the percentage of elderly Americans in the labor force in 2019 was 20 percent, which is twice the level in 1985. The trend in Americans age 65 years and older continuing to work is expected to continue rising, perhaps even returning to or surpassing the high level of 28 percent in 1949, a decade after Social Security was established.

However, that rising trend appears to have has been interrupted by the coronavirus pandemic. The 2020 economic downturn has resulted in several million workers leaving the labor force with many beginning Social Security earlier than planned. As most of them are lower-income workers, many may need to rejoin the resurgent economy in order to supplement their monthly Social Security benefits. 

While the U.S. level of 20 percent labor force participation among the elderly is above the average for OECD countries, about a dozen countries had higher levels than the U.S. Among those countries are Israel (22 percent), Japan (25 percent), Mexico (27 percent) and South Korea (34 percent).

Numerous firms, organizations and individuals spread across the U.S. as well as on various internet websites offer suggestions, plans and services for retirement planning that aim to permit Americans to retire without facing the necessity of returning to work. Most Americans, however, encounter difficulties following those suggestions and plans for retirement 

Many Americans say that they simply don’t make enough money to put aside savings today for a retirement that’s years ahead in an uncertain future. Others report struggling to pay their current bills for rent or mortgage, car payments, insurance and normal day-to-day living expenses as well as paying down existing debt.

In sum, based on the available evidence on savings, finances, pensions, Social Security and expenditures in old age, it is becoming increasingly evident that retirement without work is no longer a feasible option for most Americans. For those who dream about quitting work at typical retirement ages, they would be wise to take the word of advice offered at the outset: fuhgeddaboudit!

Joseph Chamie is a consulting demographer, a former director of the United Nations Population Division and author of numerous publications on population issues, including his recent book, “Births, Deaths, Migrations and Other Important Population Matters.”