Top Reason Aging Clients Keep Working2
Gary McPherson, an Australian music psychologist, discovered that he could predict how well a child would be able to play an instrument before their first lesson. He studied 157 students from seven years old through high school. He predicted their success by asking them this simple question, “How long do you think you’ll play your instrument?” Possible answers were: through the end of the year, through primary school, through high school, or all my life. Students who indicated a long-term commitment outperformed the others. Their success was triggered by a strong sense of purpose.
Likewise, having a purpose can be the key to a fulfilling retirement. Like McPherson, you can likely predict how well a client’s retirement will go based on whether or not they appear to have a purpose for their future. For some, a way of maintaining a sense of purpose can be continuing to work.
What We'll Cover
- Does your client have to work?
- What if your client wants to work?
- What resources are available to help?
First, Does your client have to work?
As their financial professional, you’re in a good position to help your clients who are considering retirement to answer this question from a financial standpoint. Will their income sources, e.g. social security, pensions, investment income, provide enough income to satisfy their lifestyle? If not, working longer can be a solution. But make sure clients understand how working could affect their social security benefits after they've filed, and health care coverage.
Clients can get a double penalty from social security
First, if they begin taking Social Security before their full retirement age, their payments will be reduced. Second, if they earn more than Social Security’s earning limits, their benefits will be reduced by $1 for every $2 they earn over the limit. They may get the second penalty back from Social Security after they reach full retirement age, but it’s a complicated formula and can take a long time.1
How can not working affect health insurance coverage?
If your clients retire before age 65, they won’t get Medicare coverage. Most part-time jobs won’t provide health care insurance. The cost of purchasing their health care insurance can cost tens of thousands of dollars.
Second, What if your client wants to work?
A 2021 EBRI (Employee Benefits Research Institute) surveyed working retirees about their reasons for working. The number one reason was that they want to stay active and involved (88 percent). A second reason was that they enjoyed working (78%).2 While money alone is the appeal for many to continue working past their traditional retirement age, others see work as providing a sense of purpose, personal meaning, and a vital connection to the social network of people they spend more waking hours with than their family.
If your clients want to keep working, ask them what they enjoy doing, what they’re good at, or if there’s something they've always wanted to try. Share any insights you’ve observed about what they like or don’t like about their career experience. If they’re already working, and they like their job, ask if they’ve talked with their employer about staying with them, either full- or part-time.
If your client fears they've aged out of the workplace, share these facts:
- The U.S. Bureau of Labor Statistics (BLS) projects that by 2029 — just six years from now — 13 million people age 65 and older will still be working. These older workers will constitute the fastest-growing segment of the workforce from 2014 to 2024. While the total number of workers is expected to increase by 5 percent over those 10 years, the number of workers ages 65 to 74 will swell by 55 percent. For people 75 and older, the total will grow a whopping 86 percent, according to BLS projections.3
- In 2019, roughly 25 percent of new entrepreneurs were between 55 and 64, up from 15% 20 years earlier, according to the Ewing Marion Kauffman Foundation, a nonprofit that promotes entrepreneurship.4
Advantages older workers have over younger workers
Employers are constantly challenged to find skilled workers. Older workers have much more experience than younger ones and may be better prospects for employers. Employers like to fill positions that require customer contact with retirees. The reason: Older workers tend to be more patient, attentive, and better customer service providers than younger employees. The graph below conveys that, as a group, older workers are projected to show a greater percent change in employment over other age groups.