Want to Enjoy Your Retirement? Consider Delaying It

The bad news is that most of us will need to work longer. The good news is that, if we do it right, most of us will want to.

Retiring at 65 or even 67 is just not realistic for most people’s finances — or the government’s. So both the public and politicians need to give up on the idea that each successive generation is entitled to a longer retirement than the last. Instead, the US needs to rethink not only the labor market but also the very conception of work. In the new economy, many Americans will work well into their 70s.

As the IMF’s latest World Economic Outlook makes clear, in the long term the US can expect slower growth and higher debt. The slower growth comes from a shrinking, aging work force and declining productivity. The higher debt comes from more spending commitments — in large part to help care for the older population.

Fortunately, there is an obvious solution staring us in the face: Almost everyone can work longer. This would increase growth by expanding the size of the labor force, potentially boost productivity, and lessen the financial strain from greater entitlement spending.

Working longer makes sense on a more individual level as well. One study estimates that delaying retirement by just six months is the equivalent of saving an additional 1 percentage point of your earnings for 30 years. Work can also improve the quality of people’s semi-retirement, because socialization and a sense of purpose have been found to be key factors encouraging healthy aging and quality of life.

And people are working longer. The share of people over 65 still in the labor force has increased over time, although it dipped below 20% during the pandemic. Ideally, it should be closer to 50%.