We frequently hear stories about retiring early, but today Mellody Hobson talks about retiring late.

More and more, people are abandoning the dream of playing canasta beachside in favor of staying in the workforce. This is a big change from the past fifty years, when Americans were retiring younger and younger, aided by private pensions and Social Security. But that trend seems to be reversing.

Why is that?

In a word: Money. One of the main reasons people are retiring later is because they simply can’t afford to put on their house slippers. This has proven especially true as companies move away from fixed pension plans in favor of 401(k) plans. On top of that, we’re living longer. The average American lives to be 78 years old. These factors have workers reconsidering their retirement plans.

In 1950, nearly half of men 65 and older were still in the labor force, according to the Census Bureau. That percentage bottomed out in the 1980s at less than 16 per cent. It has since edged up to about 19 per cent, and experts believe it will increase even more as the oldest baby boomers reach 65.

While the average boomer plans to retire from his full time job at age 63, nearly 80 percent say they’ll work on a part-time basis well beyond that.

In April, a Gallup survey of nonretired adults found that the average American expects to retire at age 67 — four years later than those polled a decade earlier and seven years later than those polled in the mid-1990s.

So people are working longer because they don’t have enough money to retire?

Exactly. A recent Gallup survey of non-retired adults found that only 38 percent of the people surveyed—a new low—believed they would have enough money to live comfortably in retirement.

And preparing for retirement can’t be kicked down the road, because the other picture that is emerging is how many people will live very close to the poverty line in retirement.

Americans’ views about what it takes to live comfortably in retirement is skewed. About a third of middle-class Americans believe their retirement income will be 50% of their current annual income or less. With the median household income at $50,000 that means they’ll end up with $25,000–close to the poverty line for a family of four.

Also, higher rates of divorce and separation could result in greater financial hardship for aging baby boomers. In 1980, about two-thirds of Americans age 55 to 64 lived in married-couple households. That percentage fell to less than 58 per cent in 2005.

We all have to work until the day we die?

No! A lot of the reasons people are retiring later are positive. One reason people are working longer is that they are living longer and enjoying better health. Another is that the nature of work has changed for many people. It is less physically strenuous than it used it to be. People are also better educated, and studies have found that the more education an employee has, the longer he or she is likely to keep working. And finally, changes in Social Security rules have taken away some of the financial penalties beneficiaries used to experience if they put in for their monthly payments while still earning a salary. And while the government has made it easier for people to keep working and still begin receiving benefits, it’s pushing back the age at which full benefits begin, to 67 from 65.

Another major benefit to staying on the job is the extended healthcare coverage you’ll enjoy. The cost of health insurance premiums for the elderly can be devastating in some cases. Employers may also offer benefits like long-term care or critical illness coverage that can save you money on premiums. However, working longer can also help seniors to save money on healthcare costs by preventing or postponing physical and mental illnesses, as keeping a job requires older workers to continue to stay active and alert while they work. A health and retirement study published by The National Bureau of Economic Research indicated a distinct correlation between retirement and increases in depression, decreased mobility and other physical and mental afflictions.

So working longer is good for you, and it makes good financial sense. The added years of earnings will allow you to continue to build your nest egg, and there are even more financial benefits: If you defer your Social Security benefits until age 70 or later, then you can expect to have to save 25% more for your retirement than if you started receiving benefits at your normal retirement age. It would often take an additional $50,000 to $100,000 of personal savings to generate a stream of income equal to the guaranteed increase that you will receive from your Old Age, Survivors And Disability Insurance (OASDI) program benefits if you postpone them for as long as possible.

Mellody is President of Ariel Investments, a Chicago-based money management firm that serves individual investors and retirement plans through its no-load mutual funds and separate accounts.  Additionally, she is a regular financial contributor and analyst for CBS News.

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