Simmons Asset Management

"I don't know what I would do if I didn't work," said my 72-year-old family member recently. She is not alone.

Because we are living longer and healthier than in previous generations, the employment of workers over 65 has increased dramatically. According to the U.S. Bureau of Labor Statistics employment of workers 65 and over increased 101 percent between 1977 and 2007, compared to a much smaller increase of 59 percent for total employment (16 and over).

In the past 10 years, the number of employed people age 65 and older rose from 4.3 million in 2002 to 7.2 million this year. The number of working seniors age 75 and older is now 1.3 million, up 41.2 percent from a decade ago. Most current employees think they'll work longer too, according to the 2012 Employee Benefit Research Institute (EBRI) Retirement Confidence Survey. Back in 1991, only 11 percent of workers said they expected to retire after age 65, while in 2012 that number has grown to 37 percent.

While many retirement age people keep working or anticipate that they will need to work due to economic need, you may be surprised to know that older workers head to the office for lots of other reasons. The EBRI found that 92 percent of those who worked beyond the traditional retirement age of 65 do so because they want "to stay active and involved," and 86 percent say they "enjoyed working." From my conversations with family and former clients, it seems like going to work every day for three or four decades brings with it an appreciation for the social interaction and skills development that a career in the workplace provides.

The problem for some people is that they may not realize they're not ready for retirement until it's too late and they have already given up their jobs. Many retirees become a bit lost without work as an anchor in their lives. Even with rich social lives and outside interests, it's difficult to suddenly downshift from a life dominated by work into one that is unstructured.

One thing is clear: Once you give up your job, it's hard to land the next one. With 12.7 million Americans seeking employment, the competition is stiff. As of March, there are 3.6 unemployed people for every job opening available. While the ratio has dropped as the labor market has improved over the past three years, the ratio is usually 2 to 1 in a healthy job market.

This means that, like most job seekers, the post-retiree set will likely face a big pay cut if they choose to re-join the labor market. According to a recent Rutgers University study, just 7 percent of those who were let go during the recession have regained their previous income. A little over half reported taking a pay cut - and of those, 29 percent took a reduction in salary of 30 percent or higher.

So, what's the answer? I learned a lot from one of my former clients, who navigated the worker-to-retirement period by suggesting a novel plan to his boss. He said, "I want to move from the starting rotation to being a closer." This is an apt baseball analogy--as a pitcher ages, he knows that he has tremendous experience, wisdom and a strong work ethic, but his body simply can't do what it once could. At age 65, my client suggested that he reduce his schedule to three days a week and help train the younger staff, and as a bonus, he would gladly be a "consultant" with no benefits. This worked perfectly, since he was eligible to get health insurance through Medicare.

While there are tangible benefits to working, like money and keeping your mind active, there are also intangible benefits, like being part of a team and being the "go-to" person for advice of all kinds. Before you give up your day job, carefully consider what you could be losing in the bargain.

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