If your retirement plan is simply to keep working, you’re taking a very big risk.
You may think the solution to not having enough money to retire is to work beyond the traditional retirement age of age 65. Just remember that life is full of surprises, and not all of them are pleasant. Holding down a job as a senior citizen can be difficult. If you don’t save for your retirement, you may find yourself both out of work and short of money.
“It’s OK to plan to work past 65, but it’s reckless to not have a contingency plan in case you aren’t able to,” says retirement and wealth management planner Brandon Renfro. “You may not be the only one to pay the price for lack of planning either. You could significantly burden your loved ones who will be responsible for caring for you.”
If you’re not saving for retirement, you’re in good company. Northwestern Mutual’s 2018 Planning & Progress Study found that one in three Americans have less than $5,000 in retirement savings, and 21% of Americans have nothing saved at all for their elder years. That means they could survive only a few months on their savings, if they were forced to stop working.
What follows are three good reasons to prepare for your retirement, even if your plan is to never stop working.
1. You could experience health problems.
No one can count on enjoying good health indefinitely. Illnesses can strike anyone at any time. If you’re battling a debilitating condition, such as arthritis, heart disease, or cancer, working beyond age 65 may not be possible. You may be forced to retire early. When this happens, life is much easier if you’ve saved for retirement.
An illness doesn’t have to be catastrophic to sideline a career, notes Cynthia Corsetti, an executive coach and career transition expert based in Pennsylvania. Anything that interferes with your ability to perform in the workplace could lead to a job loss.
“It could be as simple as ‘I can’t sit at my computer eight hours a day,’” Corsetti says.
It’s not unusual for American workers to leave their jobs sooner than they anticipated. A 2018 Gallup poll found that the average retirement age reported for Americans currently out of the workplace was 61.
When workers are forced to retire before they reach Medicare-eligible age of 65, they typically have to pay for their own health insurance. Some may qualify for temporary coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA).
It’s fine to pursue lifelong employment as a goal. Just be aware that no one can depend on maintaining good health or having the opportunity to work indefinitely.
2. You could face age discrimination.
Age discrimination is an unpleasant fact of life in the workplace. Older workers often find themselves with fewer opportunities to work or advance their careers. Worse still, they’re often the first to go when companies decide to reduce their workforces.
Craig Bolanos, a financial advisor in the Chicago area finds age discrimination to be “a cold reality.” He recommends that older workers recognize and plan for the possibility of being laid off or having their hours cut.
“A prolonged job search could result because of being ‘older’ and result in underemployment as a best case scenario,” he says.
In a 2018 national survey of adults age 45 and older by AARP, 61% of respondents said they had seen or experienced age discrimination in the workplace. Thirty-eight percent said age discrimination is common.
About one-quarter of those surveyed said they had heard negative remarks related to their age from colleagues or supervisors. Sixteen percent said they had not been hired for a job they applied for because of their age. Twelve percent said their age had caused them to miss out on an opportunity to get ahead at work.
3. Your job could disappear.
As the economy evolves, people often find themselves facing layoffs through no fault of their own. Older workers often are laid off because they’re earning more money than their younger colleagues. When older workers are laid off, it’s often difficult for them to find new jobs.
A data analysis reported in 2018 by ProPublica and the Urban Institute found that more than half of older U.S. workers are forced out of longtime jobs before they choose to retire. Once out of the workforce, older people rarely regain the income and job stability they lost.
More than one-third of people over 50 who experience involuntary departures go on to face additional layoffs, the analysis found.
According to a 2018 report from AARP, people age 55 and older who are laid off are more likely than younger workers to remain unemployed for 27 weeks or longer, which can put great stress on personal finances. Being out of the workplace for that long also makes it more likely that work skills will erode.
When displaced older workers do find new jobs, they often take pay cuts, says Steve Langerud, a workplace consultant based in Iowa. They often end up working part-time to receive benefits, such as health insurance.
Planning for the unexpected
The best way to make sure you have enough money to carry you through your senior years is to save for your retirement now. It’s fine to plan on working beyond age 65, but no one knows when circumstances will compel them to end their career. The sooner you begin saving, the better off you’ll be.
“The steady earnings that many people count on in their 50s and 60s to build their retirement nest egg… often vanishes, altering expectations and creating economic hardship,” says Bolanos.
Saving for retirement is like buying an insurance policy. If you do keep working, you may never need it — but if your career ends unexpectedly, you’ll have ability to support yourself.