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Daily headlines warn American workers that their retirement years may be far from golden. The average worker needs more retirement income than ever, due to increased life expectancy and soaring health care costs. But the main components of the retirement income system—Social Security and employer-provided pensions—are on the decline. What s more, fewer employers are providing retiree health insurance, forcing households to purchase their own coverage or do without.

This bleak picture has inspired calls to fix Social Security, shore up employer pensions, and redesign 401(k) plans. But as Alicia Munnell and Steven Sass show in this thought-provoking book, the most effective response to the retirement income challenge lies elsewhere—in remaining in the workforce longer. At first blush, it may seem almost Orwellian to suggest that saving retirement requires reducing its length. But working longer does not mean working forever. By staying on the job for another two to four years, retirees in 2030 can be as well off as those in the current generation.

Working Longer investigates the prospects for moving the average retirement age from 63, the current figure, to 66. The authors ask whether future generations of workers will be healthy enough to work beyond the current retirement age, as well as whether older men and women are willing to do so. They examine companies incentives to employ older workers and ask what government can do to promote continued participation in the workforce. Finally, they consider the challenge of ensuring a secure retirement for low-wage workers and those who are unable to continue to work.

Spending a few additional years in the labor force can make a big difference. By continuing to work until their mid-60s or beyond, most individuals should be able to secure a reasonably comfortable retirement. Implementing such a change on a large scale will not be simple, however. It requires thought and planning on the part of individuals, employers, and the government. In Working Longer, Munnell and Sass explain what each of these groups can and should do to keep the American dream of retirement alive.

Average Customer Rating:

YES YES YES

Customer Rating:

It is essential to work longer for all Americans. Why? The money is not enough from social security, pension and 401K. With the recent stock market meltdown, everyone loses money. It does not matter how smart you are. You made millions last year. But then you bought a condo in Manhattan. It went down this year. I agree with the authors. Working is the only way to make money with a guarantee, you earn it.

Time for new thinking

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Munnell and Sass propose a straightforward way to reduce longevity risk: working at career jobs for an average of three additional years. This would raise the age at which half the age cohort is out of the workforce from today's 63 to about 66 -- which was the corresponding average age of retirement for men in 1960. A major driver of early retirements is the earliest eligibility age (EEA) for Social Security benefits: 62. Most workers claim at this age, accepting reduced benefits, instead of working till their full retirement age and receiving full benefits. The authors recommend raising the EEA to 65 as an incentive for workers to stay in the workforce. They also suggest exempting workers and employers from the payroll tax after the worker reaches age 62 and extending Social Security's salary-averaging period from 35 to 40 years (130-131). Meanwhile, "The most important thing workers can do to extend their careers is to keep their skills up to date and remain responsive to employer needs" (119). "Workers will also need to stay healthy" (121). Another hurdle is employers' lukewarm attitude toward older workers. This results mainly from the increasing cost of healthcare insurance as workers age and the tendency of compensation to rise with age even if productivity declines. These factors can largely be addressed by the actions cited above. An important factor not mentioned in Working Longer is the investment savvy -- or lack of it -- of the worker in managing 401(k) investments. In a world where millions of people invest their retirement money in stable funds while paying high interest on credit-card debt, this is a major issue. A one-semester course in personal finance for high-school seniors could help future generations of Americans manage their financial lives more effectively. For additional perspectives on this important book, see the reviews in The Economist and The New York Times.

Retirement - Employment Matters

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Retirement income prospects for the average American are bleak. One third of households are totally dependent on Social Security as their only source of income. Meanwhile half of Americans are taking early retirement at age 62 which permanently reduces these benefits. Once common, defined benefit plans that assure retirees an inflation adjusted income bundled with healthcare provisions are rapidly disappearing outside the public sector. Less than 20% of the work force has these guarantees. Less than half of the private sector work force contributes to any personal retirement plan. And a Federal Reserve study (2004) finds that those that do contribute have only saved about $60,000. More could be said about this gloomy financial picture, but in this study retirement is viewed from an employment perspective. The authors argue for reshaping government, employer, and employee attitudes on the need to extend working careers another 3-4 years to improve the odds of living comfortably in retirement. Among their key ideas: Raise the early retirement eligiblity age for collecting Social Security from 62 to encourage more Americans to continue working and contributing to their retirement plans. Allow older workers to opt out of the 6.2% Social Security payroll tax to increase their income and encourage them to stay in the work force at a stage when accruing additional Social Security benefits are negligible. This short study is rigorously organized and amply supported by available research. The key ideas are clearly presented - but there is an academic dryness about it all. The main points are repeated frequently but the treatment is not patronizing. We are convinced. America needs to work to "full retirement" currently age 66. So, rather than raising the early retirement eligibility age for Social Security, why not just simply eliminate it? Certainly there is no arguing with the authors' conclusion that retirement has become a far "messier" experience than in the past. But given the realities they describe, their central thesis - that Americans can have a comfortable retirement by working just another few years - seems overly optimistic.