Can't Ever Retire? Look on the Bright Side

All is not lost for seniors whose nest eggs were wiped out by the market crash. They can work longer. The percentage of American aged 65 to 75 who will remain employed will increase to 25% in 2010 from just 17% in 1990, according to a study by the non-profit research organization RAND Corporation. This trend will continue until at least 2030, say the study's authors Julie Zissimopoulos, an economist at RAND and her co-author, Nicole Maestas.

While some seniors may resent having to put off plans of retirement, the development could have some major benefits for society, at least as far as our cash-strapped social programs are concerned. The trend of older Americans working longer could ease the burdens on overtaxed Social Security and Medicare systems, says the study, which was published in the Journal of Economic Perspectives.

"Changes in pensions, longer life expectancy, less disability at older ages and more women in the workforce are all trends that are gaining momentum and are likely to cause more Americans to delay retirement," the study said. "Even without new policy changes to encourage the behavior, there are good reasons to conclude that the trend will be propelled forward."

More Workers, More Money for Programs

As seniors move towards retirement, there are proportionately fewer taxpayers who are needed to fund the expensive social programs set up as a safety net for retirees. The longer seniors work, the more they can contribute to these programs.

There are a number of other benefits from extending employment for seniors. The obvious ones are more income, the elimination or reduced need to tap into savings and continued health-care coverage. Since seniors who remain employed are not using the Medicare and Social Security systems, the trend could buttress the shaky financial condition of these overburdened programs.

The study notes the rate of labor-force participation among younger women has risen over time, so that women are likely to qualify for Social Security benefits based on their own record. In order to receive higher benefits, these women will be motivated to extend their work lives.

The U.S. System Is More Flexible Than Others

The United States is uniquely positioned to encourage these trends. Our employment system is more flexible and does not have a rigid mandatory retirement age which is common in many European countries. (For the negative impact delayed retirement has on young adults' job prospects, check out this story.)

"We should consider removing the disincentives to delaying retirement and let people make the decision about whether they want to remain in the work force or not," Zissimopoulos said.

Unfortunately, for many seniors, this decision has already been made for them.