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In recent years, a growing number of Americans past traditional retirement age continue to work well into their golden years. According to the US Census Bureau as of March 2024, 22 percent of Americans over age 65 remain in the workforce. In some states like Indiana, this percentage climbs even higher, with approximately 32 percent of seniors still punching the clock.
While many seniors choose to work beyond retirement age out of preference, a concerning number find themselves seeking employment out of necessity. Rising costs of living, inadequate retirement savings, unexpected healthcare expenses, and economic pressures have created a perfect storm forcing many older Americans back into the job market. This trend raises important questions about the financial security of our aging population and the effectiveness of our retirement systems.
The phenomenon of working seniors isn’t inherently problematic. Many individuals derive purpose, social connection, and financial benefits from working past traditional retirement age. For some, work provides mental stimulation and a sense of contribution that enhances their quality of life. The concerning aspect is when seniors work not by choice but by necessity.
Several factors contribute to this rising trend. The shift from defined-benefit pension plans to defined-contribution plans like 401(k)s has transferred retirement risk from employers to employees. Market volatility, inadequate savings rates, and longevity risk (outliving one’s savings) have left many seniors financially vulnerable. Rising healthcare costs, housing expenses, and general inflation have eroded purchasing power for those on fixed incomes.
One factor affecting senior employment opportunities is the changing labor market dynamics. Since 2020, approximately 3.7 million immigrants have joined the US workforce. While immigration provides benefits to the economy at large, it also creates a more competitive job market, particularly for positions that might otherwise be filled by seniors looking for part-time or flexible work.
Many older workers seeking employment find themselves competing with younger immigrants willing to work for lower wages, especially in sectors like retail, hospitality, and service industries. These industries have traditionally been sources of post-retirement employment for seniors due to their flexibility and lower physical demands.
The issue isn’t immigration itself—immigrants contribute significantly to economic growth and fill labor gaps. Rather, the problem lies in the lack of balanced policies that ensure immigrants and American seniors have access to suitable employment opportunities. A well-functioning economy should be able to provide opportunities for all workers, regardless of age or country of origin.
While minimum wage increases aim to improve living standards for workers, they can inadvertently impact senior employment. Take California as an example: the state has implemented a $20-per-hour minimum wage for food service workers, signed into law by Governor Newsom in 2023. While well-intentioned, this policy has led to an epidemic of restaurant closures as employers find they can’t sustain profitability with higher labor costs.
California historically had high senior employment in the hospitality and restaurant sectors, industries that have traditionally provided flexible options for semi-retired workers. As restaurants close or reduce staff to manage costs, these opportunities disappear. Employers facing higher minimum wage requirements often prioritize younger, faster workers who may be perceived as providing more value per dollar of wages.
This illustrates how policies designed to help workers can sometimes have unintended negative consequences for specific groups, including seniors seeking supplemental income during retirement. It’s a complex policy issue without easy solutions, as living wages and employment opportunities are important social goals.
For many working seniors, the taxation of Social Security benefits creates a financial disincentive to work. Under current tax law, individuals with incomes exceeding certain thresholds face taxation on their Social Security benefits—a policy that effectively penalizes work.
Specifically, after earning $25,000 (or $32,000 for married couples filing jointly), recipients must pay income tax on 50% of their Social Security benefits in addition to normal income taxes. If income exceeds $34,000 ($44,000 for married couples), the taxable portion increases to 85% of benefits.
This creates a problematic situation where seniors who work to supplement inadequate retirement savings face a higher effective tax rate than they might expect. Think of a senior earning $30,000 from part-time work while receiving $20,000 in Social Security benefits. Not only do they pay regular income tax on their earnings, but they also owe taxes on a portion of their Social Security—funds that were already subject to payroll taxes during their working years.
This double taxation creates a significant disincentive for continued employment. Many seniors find that working additional hours yields diminishing returns after accounting for this tax treatment, pushing some to limit their work hours or avoid employment altogether despite financial needs or the desire to remain active in the workforce.
The irony is that Social Security was funded through payroll taxes on these same individuals during their main working years. Taxing these benefits again during retirement amounts to double taxation, a policy that many argue is unfair and counterproductive.
Another factor driving senior employment is inadequate retirement savings. According to recent data from Forbes, the personal savings rate in the United States stands at approximately 4.1% of disposable personal income. This shows a dramatic decline from the 13.4% savings rate observed in 1975.
This decline in savings rates has occurred despite increased longevity, meaning Americans need larger nest eggs to fund longer retirements. Several factors have contributed to this savings shortfall:
The result is that many seniors reach retirement age with insufficient savings to maintain their standard of living without continuing to work. According to various studies, a large percentage of Americans have less than $100,000 saved for retirement—far below the recommended amounts for maintaining financial security through a retirement that might last 20-30 years.
No factor has had a more profound impact on retirement security than the dramatic increase in healthcare costs. Over the past 40 years, healthcare expenses have more than doubled as a percentage of GDP, rising from 8.2% to 17.8%. Hospital care, physician services, and prescription drugs account for the majority of this increase.
The Affordable Care Act of 2010, while extending insurance coverage to millions of previously uninsured Americans, has been associated with increased costs for many middle-class households. Insurance premiums, deductibles, and out-of-pocket expenses have risen, creating financial stress for retirees living on fixed incomes.
Medicare, while providing essential coverage for seniors, leaves gaps. The program covers about 80% of approved medical costs, leaving seniors responsible for the remaining 20%, plus premiums, deductibles, and costs for services not covered by Medicare. These expenses can quickly erode retirement savings, especially for those with chronic conditions requiring ongoing care.
The financial burden of healthcare is troubling because it often increases with age, precisely when earning capacity tends to decrease. Many seniors find themselves caught in a difficult cycle: they work to pay for healthcare costs, but the stress and physical demands of working may exacerbate health conditions, leading to even higher medical expenses.
The challenges facing American seniors are compounded by certain policy disparities that highlight disconnects between politicians and their constituents. For instance, members of Congress enjoy healthcare benefits far more generous than those available to average Americans. Elected officials in Washington DC pay approximately 28% of their healthcare premiums, with taxpayers subsidizing the remaining 72%.
This disparity may help explain why policies that would substantively address the financial challenges facing seniors—like eliminating the taxation of Social Security benefits or implementing more effective measures to control healthcare costs—have gained little traction. When policymakers are insulated from the financial pressures facing ordinary citizens, they may lack the personal motivation to prioritize these issues.
Addressing these challenges would require an approach that balances multiple policy objectives:
Given the challenges within traditional retirement systems, many Americans are exploring alternative approaches to financial security in retirement. One increasingly popular option is utilizing permanent life insurance, particularly participating whole life insurance, as part of a retirement strategy.
Whole life insurance offers several features that can benefit retirement planning:
Many clients at McFie Insurance, for example, are leveraging whole life insurance policies as part of their retirement planning strategies. These policies provide guaranteed growth, liquidity, and tax advantages that help reduce some of the challenges facing retirees in today’s economic environment.
By building cash value in these policies during their working years, individuals create a resource they can tap for supplemental income, emergency expenses, or major purchases during retirement without increasing their tax liability or jeopardizing their Social Security benefits. For those concerned about healthcare costs, the liquidity provided by policy loans can help cover unexpected medical expenses without depleting other retirement assets.
Beyond economic considerations, there are ethical dimensions to the challenges facing working seniors. Many religious traditions emphasize care for the vulnerable and the dignity of work. The Bible, for instance, instructs believers “not to oppress the foreigner” while also teaching that “those who don’t take care of their own are worse than an infidel.”
This balanced approach suggests policies that respect the contributions of immigrants while ensuring opportunities for American seniors who need or desire employment. It also implies a responsibility for individuals to plan prudently for their own financial security while acknowledging the role of community and government in providing appropriate support systems.
In practical terms, this balance might include:
The growing number of retired Americans seeking employment reflects a confluence of factors: economic pressures, policy decisions, demographic changes, and individual choices. While work during retirement can be fulfilling and beneficial when freely chosen, financial necessity should not be the primary driver pushing seniors back into the workforce.
Addressing this challenge requires action at multiple levels:
At the individual level, prudent financial planning is essential. Those still in their working years should prioritize adequate savings, consider the potential role of permanent life insurance as part of their financial strategy, and develop realistic expectations about retirement timing and lifestyle.
At the policy level, lawmakers should reconsider tax structures that penalize working seniors, implement more effective measures to control healthcare costs, and develop balanced approaches to labor market issues that account for the needs of all workers, including seniors.
At the community level, support systems should be enhanced to provide assistance to vulnerable seniors while respecting their dignity and autonomy.
By addressing these issues thoughtfully, we can work toward a future where seniors work by choice rather than necessity, where retirement represents a time of financial security rather than economic stress, and where the contributions of older Americans continue to be valued and supported.
The fact that 22 percent of Americans over 65 remain in the workforce—with even higher percentages in some states—reflects complex economic realities rather than simple personal preferences. While work can provide purpose and fulfillment at any age, financial necessity should not be the primary factor keeping seniors in the workforce.
The solution lies not in a single policy change but in a comprehensive approach that addresses multiple challenges: inadequate savings, rising healthcare costs, tax policies that penalize work, and labor market dynamics that sometimes disadvantage older workers. Individual responsibility for financial planning, including exploring alternatives like permanent life insurance, plays a crucial role in securing retirement.
By acknowledging these challenges and working toward thoughtful solutions, we can create an environment where seniors have genuine choices about work and retirement—where continuing to work reflects personal preference rather than financial desperation, and where decades of contribution to society are rewarded with security and dignity in later life.
For those concerned about their own retirement prospects, exploring financial strategies that include vehicles like participating whole life insurance may provide flexibility and security. Having access to funds that don’t trigger additional taxation can make the difference between struggling to make ends meet and enjoying a comfortable retirement, with or without continued employment.
The challenges facing working seniors are not insurmountable, but addressing them requires honesty about their causes, creativity in developing solutions, and a commitment to policies that prioritize the well-being of older Americans who have contributed to society throughout their working lives. They deserve nothing less than our best efforts to ensure their financial security and dignity in retirement.
Tomas P. McFie DC PhD
Tom McFie is the founder of McFie Insurance and co-host of the WealthTalks podcast which helps people keep more of the money they make, so they can have financial peace of mind. He has reviewed 1000s of whole life insurance policies and has practiced the Infinite Banking Concept for nearly 20 years, making him one of the foremost experts on achieving financial peace of mind. His latest book, A Biblical Guide to Personal Finance, can be purchased here.
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