The Changing Definition of Retirement
October 19, 2002

The economy is in a slump. Employers aren’t hiring. Yet in a break with past downturns, the labor force participation rate of workers 55 and older is up sharply.

What’s going on? Simply put, the stock market. Companies retreated in recent decades from offering their workers the traditional "defined benefit" pension plans, where the employer commits to a fixed payout of money to its retirees. Instead, companies now favor "defined contribution" plans, such as 401(k)s, 403(b)s, and IRAs. The employee is responsible for funding and investing retirement money. Among households with a pension, those relying on a defined contribution plan rose from nearly 40 percent 1992 to 57 percent in 1998. The bear market mauling of these retirement portfolios is behind many a kitchen table conversation to delay retirement or to go out and find a job.

But the trend towards aging workers staying gainfully employed will continue long after the bear market enters the history books. Many boomers say they don’t want to stop working even when their hair turns from gray to white. A recent survey of workers 45 and older by the AARP found that 69 percent plan on working during retirement, perhaps by changing careers, laboring part time, or starting a business. This transformation of life during our Golden Years will be helped along by the reality that we’re living healthier, longer lives. Boomers are also better educated then their parents.

The American concept of old age has changed before. For much of the nation’s history, the word retirement meant ill health, involuntary unemployment, and a degrading dependence upon family, charity, or community organizations for shelter and food. But Social Security, Medicare, and Medicaid, along with the spread of corporate pension plans in the post-World War Two era, dramatically improved living standards among the elderly. Retirees even developed a distinct lifestyle captured by the mass migration to Sunbelt communities, traveling in RVs and bus tours, spending long mornings on the golf course, and other recreational pursuits.

A job provides the tangible return of an income and, in many cases, retirement and health care benefits. But there are intangible rewards that people increasingly value: the camaraderie of co-workers, the enjoyment that comes from belonging to a community; a sense of purpose and contribution.

The dark side of retirement savings plans is painfully obvious these days. Pension plan reforms are called for. But in coming decades, older workers may well end up with more choice between leisure, family, and work than ever before.

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