March 4, 2019
Philip Hernandez, 75, gets on a bus two days a week to go to his part-time job in Boulder, Colorado, where he has been a Medicare counselor for 12 years. He enjoys the work, but he does it mainly out of necessity—he needs the money to cover his living and health care expenses.
“My wife and I ought to be in great shape, but we aren’t,” says Hernandez. “We’re not under water, but at the same time, we’re not living as well as we should be in our later years.”
After 27 years of working for the Colorado state government, Hernandez retired from full-time work in 2003 but wishes he had stuck it out for three more years to earn 7.5 percent more in benefits. “We spent too much money on vacations, helping children and grandchildren with college, and other expenses,” he says.
The need to continue earning money in his mid-70s came as a surprise to Hernandez: “We aren’t getting the message to seniors about planning for retirement.”
Hernandez’s story is not uncommon. In a 2016 survey by The Pew Charitable Trusts, many workers in the private sector expressed uncertainty about their ability to retire, and nearly two-thirds believed they would likely have to work past age 65. While some survey respondents said they wanted to work later in life (by choice), a majority of those who said they will work past 65 said financial pressure probably would force them to do so.
Expenses can also go up in retirement. That was the case for Hernandez, who now pays $2,000 a year for prescription drugs, compared to $500 when he was employed. Hernandez plans to work another year until he’s out of debt so that he and his wife can buy a home and move out of their rental apartment.
John Scott, who directs Pew’s retirement savings project, says that research shows how common these issues can be. “For more and more Americans, it’s not clear how they will manage in retirement. Many people shared with us in our survey research that they feel they need to continue working when they would prefer to retire,” he says. Scott also notes that fewer employers provide traditional pensions today than 40 years ago and that workers don’t always save enough when they are given the option to participate in a retirement plan. “Studies show that, on the whole, Americans are not saving enough for retirement,” Scott says.
On the upside, some people enjoy being able to contribute in a paid position later in life, and those additional years working can provide a financial cushion. For example, each extra year of work or other savings and not claiming Social Security between ages 62 and 70 could boost your Social Security benefit by 7-8 percent.
Pat Martin of Cedar Rapids, Iowa, has appreciated the opportunity to save more in her later years. Martin was widowed at age 51, which forced her to consider how she would live on her single income as a teacher. “I never saved a nickel in my life,” she says. “A friend who did investments knocked on my door and wanted to talk to me about my money.” She encouraged Martin to set up an individual retirement account with automatic deposits. Martin listened and was grateful. By the time she retired from teaching 13 years later, she had socked away $80,000 tax-free.
Those IRA disbursements come in handy when Martin, now 76, has an unexpected expense—like when a huge Douglas fir fell in her yard and needed to be removed. Between her savings, Social Security, and her pension, Martin says she’s comfortable in retirement—although she watches her spending: “I live well, but I’m careful.”
To learn more, view the 2018 Pew Charitable Trust analysis, “When do Americans Plan to Retire?”