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Business

June 23, 2013

The new retirement: It's later now

For many Americans the concept of a traditional retirement, 30 or more years of leisure after a productive career is neither realistic nor appealing.

Increased life expectancy, better health and the desire to remain active and productive into their 70s, 80s and even 90s, are prompting them to re-examine the concept of retirement.

For some, financial realities play the central role in the decision to continue working. The effects of the recent financial crisis on retirement savings and expectations for lower future investment returns are encouraging those of all economic levels to reconsider whether their nest eggs can support 30 or more years of withdrawals to cover retirement spending.

According to Wharton School professor Olivia Mitchell, this trend toward working longer is actually a return to the realities of the early 1900s, before the advent of Social Security and what we now consider the “old-fashioned” plans that pay monthly benefits for life.

Back then people worked for as long as they were physically able. “Sitting around and doing nothing was an alien concept,” says Mitchell. Now, due to factors including the shift away from those pension plans, concerns regarding the viability of Social Security and the realization that retirement can last decades, the historical trend toward retiring earlier began to reverse itself starting in the 1990s.

However, to conclude that people are delaying retirement solely for economic reasons would be ignoring the influence of other important considerations. A survey of wealthy individuals conducted by Barclays Capital suggested that a majority of those who could otherwise afford to retire without financial worries are choosing to work for as long as they can. They view interesting work as a means to stay engaged, challenged and productive and to contribute to society.

The financial benefits of working longer should not be overlooked and cannot be overestimated. It is one of the most important factors for achieving retirement security because it impacts an individual’s finances in a number of ways.

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