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Working longer is no substitute for retirement savings, economist warns

Staying on most jobs into old age may not be healthy

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Mark Huffman
Reporter

Mark Huffman has covered consumer issues since 2004, with a special focus on protecting and empowering older adults. A former news correspondent for the Associated Press Radio Network, Westwood One, and ConsumerAffairs, Mark brings decades of journalistic experience to RetirementLiving.com. He is passionate about giving consumers a voice and helping them make informed decisions. Mark has also created educational content, including Senior Scam Alert, a video resource designed to help seniors recognize and avoid fraud. He holds a B.A. from the University of Kentucky and lives with his family in Richmond, Virginia.
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Key Insights

  • Economist Teresa Ghilarducci warns that relying on working longer to compensate for inadequate retirement savings is ineffective for most Americans, especially those in physically or mentally demanding jobs.
  • Only a small elite, such as professionals and financial advisors, may benefit from working into old age, while the majority face increased health risks and stress from extended employment.
  • The decline of traditional pensions and the shift to self-directed retirement savings have compounded retirement challenges, making robust pension systems more essential than ever.

The data show that Americans are working longer, and more people plan to extend their work lives. While there are several reasons for this, a labor expert warns that working longer to make up for a retirement savings shortfall is doomed to fail.

Economist Teresa Ghilarducci, professor at the New School and author of “Work, Retire, Repeat,” argued that this advice, while convenient, masks a deeper problem.

“The working longer consensus was really a convenient untruth,” Ghilarducci said in a recent episode of the Decoding Retirement podcast. “The consensus was that … if people haven’t saved for the last 40 years … when we told them to, at least they have an out and we don’t have to do anything about it.”

Part of the problem is that people are living longer. When Social Security was established 90 years ago, the retirement age was 65. The average American lifespan was only 66 years. 

Today, the average lifespan is about 78 years, leading to worries about outliving your savings. The answer, for many, is to stay employed longer. But Ghilarducci said working into your senior years is not an effective way to make up for a savings gap, and for most older adults, it’s not healthy.

Working longer works for the elites

“What kind of people are made healthier if they work into old age?” she asked. “It depends. If you’re part of the elite, a professional or financial advisor, work might make you healthier. It can keep your mind alive, and you can control the pace of your work. But that’s only about 11% of the population.”

The rest of the population, Ghilarducci contends, have jobs that, were they to continue them into old age, might hasten death. She notes that job-related stress produces cortisol, and in older adults, cortisol is bad for the heart.

In her book, Ghilarducci wrote that the end of corporate pensions and the advent of self-directed retirement savings accounts have contributed to the challenges retirees now face.

“The truth is, pensions are needed now, more than ever,” she wrote. “Working longer is not the ‘freebie’ it is made out to be. Working longer means giving up well-deserved rest in old age.”