Magazine article The American Prospect

Forget Retirement. Get to Work. (Special Section: Retirement Insecurity)

Magazine article The American Prospect

Forget Retirement. Get to Work. (Special Section: Retirement Insecurity)

Article excerpt

A POPULAR MYTH IS THAT because we live longer, we should work longer. But while Americans indeed enjoy longer life spans, a great many are not happy to be in the paid workforce. They are working not for the social or intellectual stimulation but out of plain economic need. They are working because America's pension system is collapsing--and the more it collapses, the more older Americans will have to work.

Further, when financially independent retirees are not dependent on paid employment, it's good for the economy as well as for older people themselves. For one thing, secure retirement frees jobs for younger workers. For another, it helps maintain demand during economic downturns. And with both fathers and mothers of young children increasingly in the paid labor force, pensioners are a source of civic and volunteer energy for their communities.

Yet the prevailing wisdom is that old folks need to go back to work to ease the strain on retirement systems. Even some liberals are sympathetic to raising the retirement age. Under existing law, the age at which people can receive their full Social Security benefits gradually increases to 67 by 2012. Many proposals would increase it further, to age 70.

Two years ago, in response to outcries from senior citizens who were working or who needed to return to work, Congress changed the law to allow most people drawing Social Security to be in the paid labor force without sacrificing any Social Security benefits. Pre-existing policy reduced the Social Security check by $1 for every $2 of earned income, on the premise that retirement benefits should go to the retired. The change in policy is, in effect, a confession of policy failure. In today's economy, fewer and fewer Americans can afford to retire.

All of this is the reversal of a trend that began after World War II, at which time retirement was broadly institutionalized. What official policy has not yet done is already being achieved by the sagging stock market and by the erosion of private pensions. In February, after the high-tech meltdown but before the latest stock declines, The New York Times reported that 22 percent of workers in the 55-64 age group said they would have to work longer because of losses in their 401(k)s and other retirement accounts. The pro portion planning to work longer rose to 25 percent for workers aged 65 and older. Indeed, earnings from work are the fastest-growing source of income to those who are ostensibly retired. This reality runs counter to the prevailing wisdom that the stock market has made 401(k)s the most important source of retirement and that Social Security was on the fritz.

In the last decade, Social Security emerged as the only reliable source of income for the elderly, while wage income emerged as the fastest-growing source. In 1984,13 percent of income for the elderly came from earnings; the share rose to approximately 15 percent in the early 1990s, and, by 2000, $1 out of every $5 going to elderly households was derived from paid employment. At the same time, employer pensions and individual assets have become less important. The share of income to elderly households coming from these sources has fallen from more than 43 percent in the mid-1980s to 39 percent in 2000. Except for the top tiers, the largest source of income for the elderly continues to come from Social Security, and that percentage has stayed fairly constant, hovering around 40 percent. …

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