The ‘Unretirement’ Plan: An Interview With Author Chris Farrell

Retirement is the golden egg that awaits us after decades of toil. But are the golden years all that shiny? Author Chris Farrell contends that baby boomers are changing the way we should think about work, community and the good life in his new book, “Unretirement.” Managing editor Rick Bell caught up with Farrell via email.

Workforce: The name of your new book is ‘Unretirement.’ What’s the definition?

Chris Farrell: We’re going through a period where the last third of life is being reimagined and reinvented into ‘unretirement.’ If the popular images of retirement are the golf course and the patio, the defining institutions of unretirement are the workplace and the entrepreneurial startup. The unretirement movement builds on the insight that a better-educated, healthier workforce can continue to earn an income well into the traditional retirement years. The work may be full time, but for most people it will involve part-time work, contract labor, temp jobs, bridge jobs, phased retirement plans and starting your own business. Earning an income matters. So does flexibility and meaningful work.

WF: Some experts contend boomers will outlive their retirement savings, bankrupting Social Security and Medicare. You think otherwise.

Farrell: One reason why I wrote the book was frustration at the dire demographics of aging. You know the story: The silver tsunami, the swelling tide of greedy geezers who haven’t saved enough for their retirement will overwhelm the economy with too few young workers supporting too many seniors.

Thing is, the personal finances of unretirement are compelling. Continuing to earn a paycheck in the traditional retirement years — even a slim one — offers a number of financial advantages. For most of us what we can make at work, including part-time work, contract work and temp jobs, dwarfs whatever we might earn from our retirement savings. Continuing to earn an income lets us defer tapping into our tax-sheltered retirement savings. Our money compounds longer.

You have to support yourself off the income generated by your savings for a shorter period of time. A paycheck in an unretirement makes it practical to delay filing for Social Security benefits, which are more than 75 percent higher for the typical worker at age 70 than at age 62.

The economic payoff from society tapping into the abilities and knowledge of large numbers of people in their 60s and 70s is enormous. The economy will expand, living standards will climb, tax revenues will grow, and it will be much easier to pay the tab for Social Security and other old-age programs.

WF: Is the U.S. worker entrenched in the mindset of a gold watch, retirement party and off you go in a Winnebago at age 65?

Farrell: Yes and no. Yes, financial planners real estate developers, television and moviemakers, and others create images of retirement as not working — the gold watch and a life of leisure. But the data shows that a majority of retirement-age workers remain attached to the labor market in some form or fashion.

For example, between half and 60 percent of those who leave behind a full-time career moved into a ‘bridge’ job, such as part-time and contract work, according to a [2007] study by economists Joseph Quinn of Boston College, Kevin Cahill of Analysis Group, and Michael Giandrea of the Bureau of Labor Statistics. Their research focused on workers 57 to 62 years old in 2004. They concluded that gradual or phased unretirement is becoming normal with 62 percent of these ‘war baby’ respondents moving to a bridge job compared to 58 percent of a comparable cohort in 1998. ‘Our finding further reinforce the notion that for many older Americans, retirement is a process, not a single event,’ they conclude. ‘Only a minority of older Americans now retire all at once, with a one-time, permanent exit from the labor force.’

We don’t really have a common cultural image, a common vocabulary that captures this trend toward unretirement. The power of stories is vastly underestimated when it comes to economics. ‘Economists are tellers of stories and makers of poems,’ writes economic historian Deirdre McCloskey. (After reading many economic studies I’m not convinced about the poetry!) Still, the stories we tell each other end up creating a dominant picture, a compelling narrative that shapes our desires and expectations, our savings strategies and spending habits. That is, until the evidence becomes overwhelming that the narrative no longer holds and another screenplay is called for.

We’re now at the ‘get me a rewrite’ moment with retirement. Growing up, boomers absorbed a simple model: Attend school. Work hard. Retire and embrace leisure. Move into a retirement community. Play golf. Fact is, a majority of retired Americans didn’t move to a retirement community and didn’t have a defined benefit pension plan. (They did have Social Security.)

The rewrite? An aging workforce realizes it hasn’t saved enough for the elder years. People want to continue to use the skills and knowledge they have built up over a lifetime. How will this play out? There is much experimentation going on over redefining retirement. I like the way Joseph Coughlin, head of the AgeLab at MIT, describes it: Baby boomer retirement is an ‘improv act.’ It’s a good catchphrase. We’re creating a new vision.

WF: What evidence have you discovered that shows baby boomers are redefining the employee lifecycle?

Farrell: In a dramatic shift, older men and women on average have delayed their retirements.  The decline in the employment rates for men essentially started in the 1880s and accelerated in the post-World War II era, a centurylong embrace of earlier and earlier retirement. The trend bottomed out in the mid-’80s to early ’90s. An increasing number of older men decided to hold off leaving the job. For women the story line is different, although the conclusion remains essentially the same.

Older women in the post-World War II era also retired younger, but the effect was offset by the embrace of paid labor by married women. The trend line for female retirement never showed a steep drop like that for men. Nevertheless, the post-, mid-’80s experience is similar to their male peers. In 2013 the annual labor force participation rate for men age 65 and older was up 49 percent after bottoming out in 1985. For women 65 and older, their participation rate has doubled over the same period. The era of early retirement is over.

Many people find that they really didn’t want to retire after all. What they wanted was a long vacation. Economist Nicole Maestas of the Rand Corp. found that more than a quarter of retirees reverse their decision and return to work, either full time or part time. She notes that as many as 35 percent of the youngest retirees unretired. Those joining the ranks of the unretired mostly made the decision because they found retirement less satisfying — more boring? — than they had expected. ‘Perhaps surprisingly, unfulfilled work expectations were much more common than unfulfilled leisure expectations,’ she wrote.

The shift in behavior shows up in the income data. For example, 40 percent of those ages 65 to 69 reported earning a wage income in 1990, according to Sara Rix, senior strategic policy adviser, AARP Public Policy Institute. The number had increased to 49 percent by 2010. She also highlights what I found a fascinating figure. In 2012 some 1.3 million workers were 75 and older. It’s a small number, less than 1 percent of an approximately 155 million labor force. Nevertheless, the rank of workers 75 and over is approximately triple what it was a generation ago she notes.

Similarly, one of the main trends with unretirement is senior entrepreneurship. Older people are starting businesses at an impressive rate. For instance, the share of new business formation by the 55- to 64-year-old age group is up sharply over the past 15 years — from 14.3 percent in 1996 to almost a quarter in 2013, according to figures compiled by the Kauffman Foundation.

WF: ‘Working until they die’ may sound harsh, but is it a good thing?

Farrell: Unretirement isn’t a forced ‘work ’til you die’ movement. No, it’s about finding meaning and purpose — as well as an income — during the traditional retirement years. Older workers are carrying their existing skills into new settings. A registered nurse might move from a large hospital complex to a community clinic. A certified financial planner might shift into teaching financial literacy to immigrants. There is reassurance in tapping into the knowledge developed over the years and the creative spark that comes from moving into a different sector of the economy, confronting new challenges and meeting new colleagues. Starting a business is another option. I would emphasize the desire for flexibility, spending time with family, checking off that bucket list, and finding some kind of employment that offers the opportunity to make a difference. The work place is also a social institution.

WF: Is unretirement a phenomenon of the baby boomer generation or has this been taking place for decades?

Farrell: The U.S. has never had a particularly good retirement system. There’s a lot of nostalgia about the traditional pension plan these days. It was designed to reward employees for years of service and final pay. Yet only a minority of workers — 10 to 11 percent of private-sector employees — ever labored long enough at one company to earn a decent pension in retirement. Traditional pensions did nothing for a majority of private-sector workers even at the peak of coverage. In other words, the ‘good old days’ weren’t all that good.

What’s different now is that the rethinking of retirement has the hallmarks of a movement, a grassroots movement. Boomers are experimenting with how to bring work into their elder years without continuing to put in 40 and 50 hours a week. A whole industry is emerging to help boomers figure out what to do next. … The ‘Me’ generation is fast becoming the ‘Us’ generation.

WF: Was the paternal nature of organizations for much of the 20th Century — creating pensions, funding health care — the wrong approach?

Farrell: The 65-plus person in 1900 could not recognize the life of the 65-plus person in 1990. Poverty rates among the elderly plummeted thanks to the advent of Social Security in 1935. Medicare gave retirees’ wallets a boost in 1965. Older Americans had enough financial independence to develop a distinct lifestyle and, in the past, the kind of leisure they enjoyed ‘was limited to the wealthy few that could afford it,’ writes Massachusetts Institute of Technology economist Dora L. Costa wrote in ‘The Evolution of Retirement.’

But we’re living longer. We’re also healthier and better-educated. The combinations means that more people want to stay engaged through work. I do think for the unretirement movement it makes much more sense to have universal retirement and universal health care attached to the individual rather than the employer.

I like how Peter Drucker, late philosopher of management, put it in 1950 in an article for Harper’s Monthly. ‘In a society which, like ours, will contain a high population of able-minded and able-bodied older people, the foundation must be an effective policy to make the older people productive and keep them employed. Without the roof of pensions the building would be open to the elements. Yet if we do not underpin the roof with a solid foundation, it will most certainly fall in.’

WF: Does the employer-employee relationship now place too much retirement responsibility on workers? Is there a happy medium?

Farrell: We do ask too much of workers. We work hard for our money. Employers demand a lot of effort on our part. We not only work — we raise families, spend time with friends and volunteer in the community. Our expectations of ourselves have gone up, too. We try to eat a healthy diet, get regular exercise and keep up with the latest technologies. On top of all this, we are expected to be financially savvy and, increasingly, discerning consumers of health care services.

For example, when it comes to retirement savings we know what works. Lawmakers should transform defined contribution savings plans into a best practices retirement savings product: automatic enrollment, automatic escalation, limited investment choice, low fees, and an annuity option for retirees. I’d also like to see the government open up to private companies that don’t offer a retirement plan to their workers — usually smaller firms—the federal government’s Thrift Savings Plan.

WF: Curious: Do you have any personal observations on retirees? Like, parents, relatives, colleagues, friends. Are they living the ‘unretirement’ life?

Farrell: My father worked until age 74. When he retired he continued to do work on behalf of his college and Catholic charities. I meet people all the time, some well into their unretirement and others trying to figure it out.

Rick Bell is Workforce’s editorial director. Comment below or email editors@workforce.com.