Older Americans Struggle to Afford Life After Work

workers not retiring

workers not retiring

Rethink that retirement party. More and more, seasoned workers are defying expectations and staying put in the workforce for a compelling reason-they simply can’t afford to retire.

That’s the finding from a new study by Korn Ferry that found that the number of clients with investment powerhouse Fidelity who can afford to cover all their expenses in retirement dropped from 83% last year to 78% this year.

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The Big Problem

The Korn Ferry study isn’t the only data showing a problem. Payroll services company Paychex found that about one out of every six current retirees (about 17%) were considering going back to work, with more than half of them reporting that they needed more money.

The increase in older workers staying on the job is causing concerns in the executive suite because corporate planners have been expecting their expensive older workers to retire which would open senior-level jobs for younger workers looking to advance their careers.

“You’re in a little bit of a box if the performance of the older workers is good,” says Ron Porter, leader in Korn Ferry’s global human resources center of expertise.

That’s a big switch from 2020 when corporate types were desperate to keep older workers on the job in the early phases of the COVID-19 epidemic. The resulting labor shortages that continued prompted many large companies to launch “returnship” programs aimed at recruiting and training people who’d been out of the workforce for any length of time, including parents and retirees. In 2023, however, many firms are looking to cut costs or restructure, and executives want to see higher-paid 50- and 60-somethings move into retirement.

Impact on Younger Workers

workers not retiring

workers not retiring

In fact, many corporations have been expecting the older members of their workforce to move on as naturally as the aged-in to qualifying for Social Security and could start making withdrawals from tax-deferred retirement accounts without penalty. The expectation was that younger workers with different skills could help reshape how they do business.

That desire could turn out to be bad news for middle-aged and younger workers. Because age discrimination by employers is illegal, it’s risky to target older workers. That could give older workers some new leverage with their employers, who could turn to offering buy-outs. Another option is the nascent practice of retirement-track positions. These jobs are designed to allow older workers to transition to retirement by putting them in positions to oversee and train younger workers, transferring knowledge and skill, and moving to shortened work weeks.

The Bottom Line

Older workers worried that they can’t afford to retire are staying on the job longer, causing concern among corporate executives who want their higher-priced employees to move on and open senior positions for younger workers.

Retirement Planning Tips

  • A financial advisor can help you get ready for retirement. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

  • Use SmartAsset’s free retirement calculator to get a sense of if you are on track to meet your retirement goals.

Photo credit: ©iStock.com/Moon Safari, ©iStock.com/oatawa

The post Retirement Crisis: Older Americans Struggle to Afford Life After Work appeared first on SmartAsset Blog.

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