May 12, 2007

PEOPLE LIVE LONGER, and yet: “The average retirement age is now 62, not 65. Indeed, only 27 percent of Americans retire at age 65 or later, according to the Employee Benefit Research Institute.”
I find that amazing.

UPDATE: Reader Dick Thompson thinks I find it amazing because I’m assuming it’s voluntary retirement:

The question that needs to be asked is how many people retire willingly at 62. I know that my company, Citibank seems to have a history of having a personnel cut about every year or so and it also seems that almost all of the people cut are in the age group of 61-63 or 64. I know that when I got retired of the thousands who were cut at that time the age range seemed to be about my age of 63. The cut the year before and the one before that had the same profile. At that age what are your chances of getting another job of the same type where you will not be told that you are way overqualified for the position, sorry.

The other companies on Wall Street seem to be doing the same thing. The problem is that the cutting is not done at the highest levels but at the middle management levels so that the highest level people stay on and those of us who were in the range of 60-100K or better (I was in the slightly over 100K range) are the ones who are cut and basically forced to retire. I would love to see some studies done on this question because I think a lot of the retirees are for this reason. When you are used to getting a paycheck of x amount of dollars then going from there to living on your 401K is not really a good option and people cash in their SSA. The other problem with this group is that the company health insurance is converted to COBRA after 3 months and you have to grab that or you lose it. Have you priced COBRA health insurance for people in the 60+ age range?

No, happily. But this is a good point.

ANOTHER UPDATE: Not quite such a good point, from Kevin Drum: “If you work in a stimulating, highly rewarding job like, say, law professor or paid blogger, it makes sense that you might want to keep working past 62. On the other hand, if you’ve slogged away as, say, a Wal-Mart checker or an accounts payable clerk eight hours a day for the past 40 years, it makes perfect sense that you’d want to get the hell out at the earliest possible moment, even if it means accepting a lower Social Security payment. What’s so amazing about this?”

Well, yes, but I assumed that to people with low-paying jobs, retiring early is harder as they (probably) don’t have big 401(k) plans, much less fat defined-benefit pensions that start at 62. Given what I hear about Americans not saving for retirement, if only 27 percent wait until 65 that means either that Social Security turns out to be more generous than is generally supposed, that people have more resources than I thought, or that there’s something elese going on. One thing, I suspect, may be that many of these voluntary early retirers have spouses with good benefits packages who will continue working until they hit Medicare eligibility at 65+. Because if you retire at 62, there’s a health insurance gap until 65 that is too long to cover with COBRA. Though some employers will continue health benefits for early retirees to fill that gap, I’ll be not many of those are the low-wage jobs that Drum talks about.

ANOTHER UPDATE: Reader Bruce Goldston emails: “I wonder how much this situation has been created by the huge number of public employees . . . national, state, city, and county government, and all the various municipal corporations and boards, not to mention the education establishment. Very few of those folks work til 65.” That’s true.

And reader Gary Thomas doubts the accuracy of Dick Thompson’s account: “The fact is that the Age Discrimination in Employment Act (ADEA) specifically protects employees over the age of 40 from discrimination. Companies have to bend over backward not to target them – even during early retirement ‘windows’ when they try to induce people to leave by giving them more retirement credit. It strains credulity to think that a company would want to get rid of the 63-year-olds- after all, they’ve pretty much accrued all of their pension and that cannot be taken away from them. I speak as an actuary who has worked for 10 years as an employee benefits consultant.”

Well, I’m no expert, but you certainly hear a lot about efforts to squeeze out older workers. Are those stories just media myths? That’s possible, I guess.

MORE: Reader Michael Hankamer begs to differ:

I read your post on early retirement and the updates that followed. I’m afraid that your reader Dick Thompson is probably right.

I’m 62, my wife is 61. She’s retiring from teaching in June, and while her co-teachers and principal are supportive, her school administration is not. She could stay on (a continuing contract), but the administration could care less about keeping an experienced teacher — it would much rather hire an inexperienced, and cheaper, teacher to replace her. ADEA doesn’t apply. The administration isn’t actively or inactively discriminating against her; it simply isn’t trying to keep her.

My case is quite similar. I’ll be retiring when I hit 63 in a few months. Not that I really want to; I love engineering. But the emotional burden of staying on in a place where I’m not supported by my management isn’t worth the paycheck. So I’m leaving too.

My suspicion is that I’m far from alone. With the benefit of early social security, our pensions and savings, we can afford to retire, so we’re leaving voluntarily. But not because we really want to; it’s simply that the emotional burden of staying on outweighs the financial incentive to do so.

More at his blog. And note this comment regarding Kevin’s Wal-Mart example.

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