Research: Rising Health Care Costs Linked to Delayed Retirement

The Urban Institute's Retirement Policy Program has published a research article showing that older workers who expect high health care costs for themselves or their spouses after age 65 retire about later than those who expect low costs--13 months later if the worker is a man, 12 months later if a woman.

As Richard W. Johnson, Rudolph G. Penner, Desmond Toohey, the authors of "Rising Health Care Costs Lead Workers to Delay Retirement" point out, for those receiving health insurance from their employers, continued work reduces the risk of high out-of-pocket health care costs and increases retirement incomes--by raising earnings, boosting Social Security and employer sponsored pension wealth, improving the ability to save, and reducing the years over which retirement wealth must be spread--and therefore makes health care costs more affordable.

Source: Urban Institute Publication Release (May 18, 2008)

Research: Employees without Other Health Insurance Less Likely To Retire

A Watson Wyatt analysis of retirement data finds that older workers without other health care insurance options are more likely to defer retirement to stay covered under their employer’s plan. While other factors, such as whether an employee has a pension, also contribute to decisions on when to retire, "employees who rely on their employers for health care coverage and do not expect to receive employer-provided health benefits in retirement are 16.5 percentage points less likely to retire in any given year than workers with access to health care coverage through another source."

The Watson Wyatt analysis--"Predictive Factors for Retirement Timing"--was made on data collected from 1992 to 2004 as part of the University of Michigan’s Health and Retirement Study. Factors other than health care which influence retirement decisions include:

• Retirement plan types. Having only a defined benefit increases the likelihood of retirement by 4.1 percentage points.
• Public policies. The gradual increase of the age at which workers can retire and receive full Social Security benefits from 65 to 67, workers born in the 1940s are less likely to retire early than those born in the 1930s.
• Household wealth. While workers’ household financial wealth obviously has an effect on their retirement decisions, the source of the wealth also makes a difference. For example, a $100,000 increase in expected income from a pension plan is more likely to prompt earlier retirement than an increase in housing equity.

Source: Watson Wyatt Worldwide Press Release (May 7, 2008)

Study Links Retirement Income Differences and Variations in Older Worker Labor Participation Rates

Alicia H. Munnell, Director of the Center for Retirement Research at Boston College (CRR) and Mauricio Soto and Natalia A. Zhivan, both from CRR, have published a paper exploring the relationship between retirement benefits and labor force participation rates across states. In "Why Do More Older Men Work in Some States?", the first of a two-part study, the authors conclude that, based on aggregate data from the U.S. Census, variation in retirement income does explain some of the interstate variation in labor force activity, even after controlling for differences in the health of the economy, the nature of employment, and the characteristics of the workforce.

Thus, while the availability of benefits will continue to be an important determinant of retirement, these results imply that older workers may be willing to work longer in response to the coming decline in replacement rates — as Social Security contracts and small 401(k) balances produce meager streams of retirement income.

Source: Boston College Center for Retirement Research Issues in Brief No. 8-6 (April 2008)

Urban Institute Releases Report on Whether Older People Will Respond to the Demographic Challenges by Working Longer

Richard W. Johnson, Gordon Mermin, and Matthew Resseger have authored a report for the Urban Institute describing the job demands faced by workers today, the changes over time in job demands, and the impact of those changes on the employability of older workers. In the report--Employment at Older Ages and the Changing Nature of Work, the authors linked job characteristics data from the U.S. Department of Labor’s Employment and Training Administration to the Current Population Survey to calculate the proportion of workers facing various types of job demands in 2006 and 1971. Employment projections were used to estimate the prevalence of job demands in 2014 and in 2041. The job attributes that were considered included physical demands, nonphysical demands, and difficult workplace conditions. They also examined how job demands varied by demographic characteristics, including gender, educational attainment, race, and age.

Looking ahead, they concluded that the prevalence of job demands will not change much in the coming decades. This forebodes well for the continued employability of older adults. In addition, the authors believe that the increase in cogntively demanding work will not prevent many workers from extending their worklives.

Source: Urban Institute Research Summary (March 28, 2008)

Research: Aging Workforce Requires Business to Rethink Working Lives

Early research into the effects of an extended working life and the challenges and opportunities that an older workforce will generate suggests that--in terms of job performance, wellbeing and skills--older workers are a much less homogenous group than younger workers. According to Professor Philip Taylor, director of the Business, Work and Ageing Centre for Research at Swinburne University of Technology, there is an increasing variation in people’s abilities as they get older and management may need to hink in terms of preparing workers when they are younger, for a longer working life.

"Policy around ageing workers needs to be about maintaining the ‘work ability’ of people throughout their life-course--not just once they are older," Professor Taylor says. "It’s about life-long learning and about how factors such as job design, work environment and skills training determine the condition in which workers arrive at the age of 50."

Among other things, Taylor says that the assumption that older workers are not interested in, or capable of, further training, is baseless, but there is evidence that "older workers prefer a different style of training than younger workers. For instance, they prefer hands-on practical training rather than classroom-style training."

Professor Taylor says another major issue for older workers is a sense of exclusion from the workplace. "Our research shows that older workers often feel they are being pushed out by not being invited to take part in training, meetings or other workplace events." This will become an increasing issue as more workers take advantage of transition-to-retirement arrangements that allow them to work part-time. "Part-time work is often not seen as real work. Managers need to be re-educated to respect different kinds of working arrangements and accept that older workers have a great deal to contribute to the workplace."

Source: Swinburne Magazine "Longer work life needs management re-think" (March 2008)

Also, see Philip Taylor (Editor), Ageing Labour Forces: Promises and Prospects (2008)

Successful Strategies for Retaining Older Workers: Urban Institute Paper

The Urban Institute has published a paper outlining successful strategies employers can use to do more to attract and retain older workers, many of whom are highly experienced, knowledgeable. According to the paper--"Current Strategies to Employ and Retain Older Workers" by Lauren Eyster, Richard W. Johnson, and Eric Toder--successful approaches include offering formal and informal phased retirement options and creating flexible work arrangements, such as part-time work, flexible schedules, job sharing, telework arrangements, and snowbird programs.

In addition the authors of this report, commissioned by the U.S. Department of Labor's Employment and Training Administration to support the work of the Taskforce on the Aging of the American Workforce, point out that federal, state, and local governments, as well as nonprofit organizations and post-secondary educational institutions, help older workers find employment and secure job training and educate employers about the value of older workers.

Source: Urban Institute Research Summary (March 7, 2008)