Small Business Labs

Bain on The Rapidly Rising Number of Older Workers

Bain & Company is one of the Big 3 strategy consulting firms (along with McKinsey and BCG).

We follow all these firms because they do excellent research, and their work with leaders in both the private and public sectors means they have a lot of influence.

Bain's Better with Age: The Rising Importance of Older Workers covers the demographic reality that workforces worldwide are rapidly aging.

As the Bain chart below shows (click to enlarge), in the U.S., one-quarter of the workforce will be 55 or older by 2031.

Japan is even older, with almost 40% of its 2031 workforce 55 or older.

Bain's research found that the motivations and attitudes of workers change as they age. Key quote:

"Before age 60, the average worker in developed markets is primarily motivated by good compensation. Averages are often misleading, but not in this case. In nearly all developed markets, good compensation is the top priority across archetypes.

Around 60, there's a tipping point. Interesting work becomes the No. 1 job attribute, and both autonomy and flexibility significantly increase in importance."

Bain also found that older workers are more likely to be self-employed - something regular readers know from our past coverage of this topic. Key quote:

"The increasing desire for autonomy and flexibility at work is often expressed in efforts to control hours ... Managing the transition to fewer hours might come through working part-time, self-employment, or doing freelance work. Our research shows a very significant increase in these forms of employment among the 55-and-over age group, compared with those in midcareer."

Age discrimination also plays a role in the increased rates of self-employment as workers age.

Simply put, because of age discrimination, self-employment is often the best, or even only option, for many older workers.

Demographers like to say that "demographics is destiny".  

And at least in the case of self-employment, they're right - growing numbers of older workers means more self-employed workers.  

See our Baby Boomer section for more older workers.  And also see the New York Times recent article How a Vast Demographic Shift Will Reshape the World. 

The Advantages of Semi-Retirement

Yahoo Finance's Could Semi-Retirement Be Right For Me defines semi-retirement as:

"a transition stage to full retirement during which people usually work fewer hours, either at their former employers or in a new part-time job. Semi-retirement can generate additional income while also providing engagement, satisfaction and even better mental and physical health."

Generating income is a key reason many are semi-retired. 

But as The Atlantic's Semi-Retirees Know the Key to Work-Life Balance points out, most semi-retirees seek more than income from their semi-retirement work.

And they especially value work flexibility. Key quote:

"...semi-retirees tend to look for roles that grant a sense of purpose, the ability to keep learning, and, perhaps more than anything, flexibility."

Historically, flexible work the semi-retired look for was hard to find. The vast majority of full-time and even part-time jobs required a commitment to fixed schedules.

But thanks to the growth of the gig economy, various forms of self-employment, and more flexible traditional jobs, semi-retirement is much easier than in the past.

But it still requires research and planning.

Fidelity's Guide to Working Less and Living More suggests 4 key things to consider before jumping into semi-retirement:

• Think through your long-term financial needs before embarking on semi-retirement.
• To make it work, know exactly how much money you spend and where you can cut back if necessary.
• Understand the costs of health care once you leave an employer's plan.
• Do some self-reflection to determine what you want to get out of semi-retirement.

Fidelity also suggests starting thinking and planning about semi-retirement well before you plan to semi-retire. Key quote:

"It's best to begin planning—and saving—during your wealth accumulation years to capitalize on employer benefits and the power of compounding."

We regularly interview people who fit the description (but rarely self-describe) as semi-retired. And based on what we've heard, Fidelity's planning advice rings true.

A key reason we study semi-retirement is that older workers have the highest levels of self-employment.  

And more baby boomers looking to semi-retire instead of fully retiring means more independent workers.

Only About Half of Americans Stay Employed Through Their 50s

Barron's Only Half of People Stay Employed Through Their 50s. How to Prepare covers research showing that about half of Americans work continuously throughout their 50s, 

As the chart below (click to enlarge) from the TIAA Institute study Should women just delay retirement and work longer? shows, women are even less likely to stay continuously employed in their 50s than men are.

Insecure jobs, caregiving requirements, health issues, and, of course, age discrimination are listed as the reasons for the lack of continuous work.  

And if you don't work continuously in your 50s, you're much less likely to work in your 60s. Key quote from Barron's article:

Eighty percent of those who worked continuously in their 50s continued to work into their next decade of life, versus just 35% of those who were intermittently employed ...

We often hear about these reasons in our research on independent workers.  

And we often hear these are reasons many in their 50s and 60s choose independent work. It provides both the flexibility to deal with life's issues and a way to at least reduce the impact of age discrimination.  

These are part of the reason older Americans have the highest self-employment rates.  

Granfluencers - Seniors Join the Creator Economy

Over the past few weeks, there's been a flurry of articles on "granfluencers" - older people earning money in the creator economy by posting on TikTok and other social media platforms.

Key quote from the New York Times article As Older TikTok Creators Flourish, Brands Are Signing Them Up:

"Older influencers have popped in popularity recently," Ms. Karwowski said. Over the past year to 18 months, she added, "it's really been accelerating‌."

CNN's Forget retirement. These Baby Boomers are amassing huge social media followings says a key driver is that more and more older people are spending time on social media. Key quote:

"... the number of people 65-plus on social media grows each year: In 2014, 21% of those in that age group were on social media, a figure that more than doubled to 45% by 2021, according to Pew Research."

Grandfluencers are becoming influencers for similar reasons as younger folks are doing so - to pursue a passion, supplement their income, and/or just for fun.  

Brit+Co's 12 Granfluencers That Prove Aging Is Fun has a list of their favorite granfluencers.  

While granfluencers are growing in numbers and impact, they are still a relatively small part of the creator economy.

The 2022 MBO Partners Creator Economy study (we worked with MBO Partners on this study) showed that only about 6% of those earning money in the creator economy were 55 or older. So online influencing is still dominated by younger folks.  

We'll have the results of our 2023 Creator Economy study in the fall.  And while we expect younger influencers to continue to dominate, we also expect strong growth in the number of older influencers.  

Americans' Retirement Confidence Declined in 2023

According to Employee Benefits Research Institute (EBRI), Americans' confidence in a comfortable retirement declined the most in 2023 since the 2008-09 financial crisis.  

As the EBRI's chart below shows (click to enlarge), only sixty-four percent of workers feel at least somewhat confident about living a comfortable retirement, down from 73% in 2022.

The reasons, according to Barron's The Baby Boomer Retirement Crisis Is Here. Why the Richest Generation Is Struggling, are:

• A lack of retirement savings by many baby boomers
• Debt levels at retirement age are higher than in prior generations 
• Recent stock market declines
• Rising costs, especially for healthcare and long-term care
• Concerns about the viability of social security and Medicare

One way to help, according to many sources, is to work a bit longer - full-time or part-time - in retirement.  

The New York Time's How a Solo Gig Can Give You a Stronger Retirement says:

Adding a few more years of work to your retirement plan can be one of the best ways to improve retirement security, and some find that the best way to keep income flowing in one's later years is a sole proprietor business. 

The Motley Fool's Here's Why It Pays to Join the Gig Economy Before You Retire suggest starting a side gig before retirement. This gives you time to build the side gig into a successful business before entering retirement.

As we've noted in the past, older Americans have the highest rate of self-employment.  

And the growing interest -and need - by baby boomers to work in retirement is one of the reasons we continue to forecast growing numbers of independent workers.

See our Baby Boomer section for more on this topic.

Most Retirees and Pre-Retirees Plan to Work in Retirement

Longevity and the New Journey of Retirement was recently released by the consulting firm Age Wave and the financial services firm Edward Jones. The report covers:

"... how the journey of retirement unfolds, the patterns of people's experience in retirement, and the keys to thriving along the way."

The report is quite comprehensive and covers a lot of ground in its 43 pages. And the entire report is well worth reading if you're interested in or thinking about retirement.

But we're most interested in work in retirement, so we'll focus on that.

As the report chart below shows (click to enlarge), 59% of retirees and pre-retirees (aged 45+) surveyed said they plan to work during their retirement years.

As we've pointed out, the highest self-employment rates are for those aged 60 and older. There are many reasons for this.

Older workers tend to want more work flexibility than younger ones. They also often have developed the skills and networks that make flexible self-employment viable. And age discrimination means self-employment may be their only choice.  

Given the size of the baby boom generation, this means a growing number of new independent workers as this large cohort continues to retire.

Interestingly enough, we dug through our archives and found a 2011 Age Wave report called Retirement 3.0. Key quote from that study:

"A productive, purposeful and challenging new chapter in life - blending work and leisure - with opportunities for personal reinvention and continued social engagement."  

So this trend has been in place for some time. And yes, we've been following this trend for too long.

See our Baby Boomer section for more on aging boomers and retirement.

The Pandemic Accelerated Boomer Retirements

Research from the Federal Reserve Bank of St. Louis found that the pandemic pushed about 3 million baby boomers to retire earlier than they would have otherwise.

As the study chart below shows, the share of retired Americans has surged since the start of the pandemic, and is well above the trend line.

The research points to several reasons for what it calls the "excess retirements".  These include layoffs, health concerns related to the pandemic and rising asset values, which may have provided more boomers with the financial cushion needed to retire.

The research note points out many of the excess retirees may not stay retired.  Key quote:

"Finally, there is the question of whether the excess retirements are permanent ... many of these new retirees may decide to return to the labor force, which will depend on personal factors as well as aggregate labor market conditions."

We suspect this will be the case.  Between financial need and a desire to stay active, many will likely return to work.

And many early retirees re-entering the workforce will do so as independent workers.  

As we've covered before, self-employment rates scale with age and are the highest for workers over the age of 65.  This is due to a mix of reasons, including older people valuing the flexibility, autonomy and control independent work provides, and what Axios calls in their article on the study the "persistent ageism" of corporate America. 

So we expect to see the number of older independent workers increase over the next two years as some of the early retirees return to the workforce.  

Retirees and the Gig Economy

According to the American Enterprise Institute's (AEI) The age re-retirement: Retirees and the Gig Economy, 20% of retired Americans also work in the gig economy.

The article lists the usual financial reasons for working in retirement.  

But more interesting is their description of some of the non-financial reasons. 

Key quote:

Ninety-six percent of over-65 workers reported that an enjoyable job is essential or important to living a fulfilling life. Another 54 percent of this group feel that their job is part of their identity.

So the gig economy may prove irresistible, as it permits “retirees” to earn part-time while enjoying the social and psychological benefits of work without the more limiting aspects of a full-time job.

We've long covered the changing nature of retirement and the reasons why it's happening.

In fact, we covered it so often we wrote back in 2013 that we were tired of the topic.

But we've continue to cover it in detail (see our Baby Boomer section) because the trend towards working later in life is an important social and economic trend.

And, the growing number of retirement age seniors gig workers is one of the drivers of the growth of the gig economy.

Almost 7 in 10 Baby Boomers Expect to or are Already Working Past Age 65

Regular readers know we cover retirement and the financial lives of baby boomers a lot here at Small Business Labs. 

The reason is older Americans have the highest rate of self-employment of any age group. So if more people retire later and work longer than in the past, the more self-employed there will be.  

Transamerica's Retirement Security Amid COVID-19: The Outlook of Three Generations study covers a wide range of topics and is loaded with interesting data.

But one finding, in particular, jumped out at us.

As the chart below shows (click to enlarge), 68% of baby boomers are either already past age 65 and still working or plan on working past the age of 65. Only 14% plan to retire prior to age 65. 

We've reviewed a lot of retirement studies over the years and this is the largest percentage saying they are going to work past 65 by far. It's also the lowest share saying they are going to retire prior to age 65.

It's likely COVID-19 is influencing these numbers. It has even the most financially well prepared baby boomers wondering if they should keep working instead of retiring. 

But this finding confirms the longer-term trend towards working longer that started in the 1990s.  

And it strongly suggests the number of older independent workers will continue to grow.

Will COVID-19 Cause Older Small Business Owners to Close Their Businesses?

According to the research firm Barlow Research Associates, the average small business owner is 60 years old. And as the Barlow chart below shows (click to enlarge), almost 40% are aged 65 or older. 

This raises an interesting question.  How will older small business owners react to the pandemic? Will they continue operating their businesses, or will they shut them down?

Because so many owners are near or past the traditional age, what this cohort decides will likely have a major impact on the recovery.  

We're hearing two things in our interviews and conversations with older small business owners on this topic.  

The majority of older owners (about 60%) we've talked to are telling us they plan on continuing to operate their businesses (although many in this group are concerned they may have to close due to bankruptcy). 

This group gave two reasons for this. Most said they simply don't want to retire or quit their business, so they plan to continue.  

A smaller share said they don't have the financial resources to retire, so they planned on keeping - or at least trying to keep - their businesses going.

But a sizable minority, about 40%, said they are considering closing their businesses permanently. 

This group gave 3 main reasons for this.

First, it's going to take a lot of time, effort and energy to rebuild their businesses.  Given their age and circumstances, they don't want to take this on.  

The second reason is many felt keeping their business going would require them to make additional financial investments in the business.  Again, given their age and circumstances, they don't want to do this.  

The third reason is more psychological.  Many simply are saying "now is a good time to close".  

By this, they mean several things.  Closing due to the pandemic is seen less like a failure, which is important given the competitive nature of most small business owners. 

Also, most owners have already gone through the trauma of laying off employees.  This is something they don't want to do again.  

And several told us they've held on too long already.  So it's time.

Of course, many who choose to retire or leave their small business will try to sell them. 

But according to Barlow, even in good times about 1/3rd of small businesses shut down completely when the owner retires.  This percentage will no doubt be higher due to the pandemic.

And if a large share of older owners shut their businesses down, the negative impacts on the economy would be quite large in terms of lost jobs and economic output.

FYI:  Barlow Research Associates is a great resource for those interested in small businesses.  We've been following them for years and find them and their insightful research for years.