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A recent report found that 20 percent of retirement-age adultsare still working — a number that has doubled since 1985.

Many surveys and projections suggest that this trend willcontinue. For instance, the Bureau of Labor and Statistics projectsthe following:

• Labor force participation rates for those over age 65 will rise2.5 percent by 2026, with an equal increase for those 65 to 74 andthose over 75.
• 10 percent of Americans older than 75 will be in the workforceby 2026.

The Insured Retirement Institute surveyed adults nearingretirement:

• 59 percent plan to work past the age 65
• 26 percent plan to work until at least age 70

Many factors determine how long someone can work—especiallyhealth. Planning to work longer can easily be derailed by anunforeseen health problem. This trend also hasfar-reaching economic implications for employers and youngerworkers.

Factors determining when to retire

The Brookings Institution developed a life-cycle model thathelps explain the decisions that lead to retirement. The stepsinclude the following:

• Assessing current financial status
• Estimating future financial earnings from income andinvestments
• Estimating life span
• Determining inheritance levels for family members

Based on this information, the  model shows stepspeople use to determine how much they need to spend and save sothat they can retire at age 65. These models assume that, over alifetime, people will choose to consume a similar amount atretirement as they do prior to retirement, a concept known asconsumption smoothing.

This model says that people choose to retire when the benefitsof working are no longer greater than the costs of working. Inother words, when earning income is no longer of greater benefitthan the time to do something else.

Unfortunately, this model does not consider real issues thataffect American workers today, which include the following:

Elimination of private pensions: Privatepensions or defined benefit pension plans (DBPP) are almostextinct, and most employees now have 401(k) plans. 401(k) plansgive employees more choices over their retirement, such as how muchto save, how to invest, when to retire, and how to manage theirmoney after retirement.

With a DBPP, workers retire at a specific age because workinglonger meant that they paid more into the system without gettingadditional benefits.

With a 401(k), the longer you work and put money into anaccount, the more you have at retirement. This has encouraged someemployees to work longer.

Lack of savings: In part, due to theelimination of DBPP, most Americans nearing retirement do not haveenough savings to retire.

The National Institute on Retirement Security found that 57percent of working Americans have no retirement savings, and threequarters of Americans fall short of age-adjusted retirement savingseven when retirement doesn't start until 67. This forces someAmericans to work longer.

Longer life expectancy: The average lifespanfor Americans in 1960 was almost 10 years less than it is today(78.6). Americans have to save more money while working, consumeless during retirement, work longer to save more money, or acombination of these.

Changes in Social Security benefits: AlthoughSocial Security is unlikely to go away, benefits are diminishing.Additionally, the typical retirement age is increasing, and seniorsget more money per month when they choose to delay retirementbeyond age 62.

For those counting on Social Security as a significant portionof their retirement income, they now have incentives to continueworking past the traditional retirement age.

Health care issues: The cost of health care isrising, particularly for seniors who may need more care. JP Morganfound that even seniors who have Medicare spend 20 percent of theirincome on health care—8 percent more than those who retired ageneration earlier.

Current state of the economy: The rate ofreturn on employee 401(k) plans can affect retirement decisions.When the rate of return is high, employees continue working inorder to save even more money, thus delaying retirement.

Debt: The Survey of Consumer Finances by theU.S. Federal Reserve found that for Americans 65 to 74, the averagedebt is $108,700. Although somewhat better for those over 75, theystill carry an average of $57,500.

In some cases, this debt is related to student debt, eithertheir own or for a child or grandchild. The GovernmentAccountability Office (GAO) found that default rates for studentloans increased with age, with 37 percent of those over age 65 withloans in default.

Planning to work indefinitely Isn't actually a plan

Although it is possible to work longer and save more money forretirement, 37 percent of workers who planned to continue workingfound they had to retire earlier than expected, according to theCenter for Retirement Research at Boston College.

In fact,  the longer someone expected to work, the morelikely they were to be unable to, due to unforeseen health issuesfor themselves or their spouse, job layoff or loss, agediscrimination and the inability to continue handling the stress orphysical demands of the job.

Delayed retirement affects younger workers

A USA Today and LinkedIn survey found that as Baby Boomers delayretirement, Gen Xers and millennials are not moving up thecorporate ladder. More than 40 percent of millennials stated theycannot advance in their field, and 30 percent of all adults feelthe same way.

This leads to younger workers changing jobs to seek advancement.In fact, 25 percent changed jobs within the last year and 30percent plan to change within the next year.

Delayed retirement affects employers

A 2019 Fidelity Investments study found that when employeesdelay retirement, the company suffers:

• 73 percent of employers reported increased costs
• 31 percent said that delayed retirements inhibited strategicplanning
• 27 percent said productivity suffered

Prudential found that the cost for employers is $50,000 peremployee per year for a one-year delay in retirement. For employeesthat delay two or more years, the costs get even higher.

How an employee financial wellness program can help

Offering an employee financial wellness program can helpemployees retire on time by teaching effective ways to becomefinancially secure well beforehand, including:

• Encouraging employees to participate in company retirementprograms through matching contributions and automatic enrollment.It is estimated that one quarter of all employees do not takeadvantage of their employer's 401(k) matching program, resulting inan estimated $24 billion in lost investment capital each year.
• Educating younger employees on the benefits of compoundinginterest, which can be a very strong impetus for them to beginparticipating in retirement plans
• Teaching budgeting for all ages and situations, such as how topay down student debt while saving for retirement.

Most importantly, a financial wellness program should go beyondliteracy and lead to lasting behavior change, offering employeestools to take control of their finances once and for all.

Kris Alban isexecutive vice president of iGrad, a San Diego-based financialtechnology company that provides artificial intelligence-poweredfinancial wellness solutions to employers, financial institutions,colleges and universities. Its Enrich Financial Wellness platform is used bymore than 20,000 employers and more than 300 financial institutionsto provide behavior-changing financial literacy education toemployees, customers and members.