The Power of Working Longer
This paper compares the relative strengths of working longer vs. saving more in terms of increasing a household’s affordable, sustainable standard of living in retirement. Both stylized households and actual households from the Health and Retirement Study are examined. We assume that workers commence Social Security benefits when they retire. The basic result is that delaying retirement by 3-6 months has the same impact on the retirement standard of living as saving an additional one-percentage point of labor earnings for 30 years. The relative power of saving more is even lower if the decision to increase saving is made later in the work life. For instance, increasing retirement saving by one percentage point ten years before retirement has the same impact on the sustainable retirement standard of living as working a single month longer. The calculations of the relative power of working longer and saving more are done for a wide range of realized rates of returns on saving, for households with different income levels, and for singles as well as married couples. The results are quite invariant to these circumstances.
This research was supported by the Alfred P. Sloan Foundation through grant #G-2017-9695. The views and approaches in this paper are solely those of the authors and do not represent the views of Cornerstone Research, Stanford University, George Mason University or the National Bureau of Economic Research. The authors are grateful to Ben Kaufman for outstanding research assistance.
- A 66-year-old worker who works one year longer and claims Social Security one year later sees a 7.75 percent rise in his inflation-...
The Power of Working Longer, Gila Bronshtein, Jason Scott, John B. Shoven, Sita Nataraj Slavov. in Incentives and Limitations of Employment Policies on Retirement Transitions, Clark and Newhouse. 2019
Gila Bronshtein & Jason Scott & John B. Shoven & Sita Nataraj Slavov, 2019. "The power of working longer," Journal of Pension Economics and Finance, vol 18(04), pages 623-644. citation courtesy of