In the SmartMoney.com blog, Encore, there is an August 10^th, 2011 article about retirement by Alicia Munnell, the director of the Center for Retirement Research at Boston College.  The article titled “8 Reasons Older People Are Working Longer” examines the recent trend of older Americans staying in the work force.

First, let’s take a look at what’s happening.  What Ms. Munnell finds is that since 1990 a higher percentage of men in the age categories 55 to 64 and over 65 are active participants in the labor force.  In fact, if you look at the “Workforce Participation” chart from 1880 to the present, you’ll see that while the percent of men over 55 in the workforce declined dramatically between 1880 and 1990, since then it has actually increased.

Why is this the case?  First, let’s look at the probable causes for the dramatic drop-off of the older-age male workforce between 1880 and 1990.  Much of the decline was a result of Civil War pensions; the initiation of Social Security during the Great Depression and its expansion in 1972; an increasing number of employer pensions; and the existence of Medicare.  All of these factors made it easier to leave the workforce and still continue to support yourself.

But why has the percentage of men over 55 in the workforce increased in recent years?  Munnell cites many reasons but one of the primary reasons is the decline in companies offering traditional pension plans.  The recent trend has been to move to defined contribution plans, for example, 401(k) plans, where your retirement income is based upon how much money you contribute and how you invest that money.  In addition, just the fact that men are living longer and are healthier has led to an increase in the retirement age.

So how do you decide when to retire?  There are definite pros and cons to early retirement; in fact, money-zine.com lists a number of them in “Best Time to Retire.”  But it’s definitely a tough question.  In Ch. 16 we focus on retirement and the important issue of how to come up with the funds for your retirement.  In effect, how to put a plan in place that will provide you with the kind of retirement you’ve dreamed of – and that brings us back to Principle 2: Nothing Happens Without a Plan.

Discussion questions:

1. When do you see yourself retiring?
2. When do you expect your parents to retire?
3. What are some of the other reasons that might explain the uptrend in how long men work?
4. What are some benefits of retiring later in life?