Why Peak 65 is such a big deal for older workers and retirement.

Read: More than 4 million people are turning 65 this year, and it will affect you — no matter how old you are

Peak 65: Boomers go out with a bang

“This is the tail end of the boomers,” said Cyrus Bambji, chief strategy and communications officer for the Alliance for Lifetime Income. “By 2030, all boomers will have turned 65.” Today’s boomers are aged 60 to 78; Generation X is 44 to 59.

Most of the Peak 65 attention has focused on the somewhat dim financial prospects for many reaching what’s been traditionally viewed as the retirement age. But Peak 65 has big implications for older workers, employers and the very definition of retirement.

“Peak 65 provides potentially more of an opportunity to get the message out that older workers are good for business and that employers are missing out on opportunities if they don’t tap in to Peak 65,” said Janine Vanderburg, senior strategist with Changing the Narrative, an anti-ageism initiative.

But Vanderburg and other older-adult analysts see Peak 65 as a double-edged sword for employment.

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Does age 65 mean retirement?

“The bad part I’m worried about is that there’s going to be more reinforcement of the outdated idea that 65 is equal to retirement,” said Vanderburg.

Jason Fichter, executive director of the Retirement Income Institute and a former deputy commissioner at the Social Security Administration, said: “We still have this cultural retirement phenomenon that anchors around 65 as framing.”

In some jobs, such as airline pilot, 65 is still the mandated retirement age.

Kerry Hannon, a senior columnist for Yahoo Finance and author of “Never Too Old to Get Rich,” puts it this way: “In the worker’s mind, you turn 65 and can’t help but think: ‘Should I continue working?’ It’s sort of a touchstone for this period of self-evaluation.”

Although the average American retires at 62 these days, the trend line for working at 65 (either part time or full time) is up, partly because so many 65-year-olds are eventually living into their 80s and 90s.

Read: This boomer has worried about retirement since 1981. Here’s what she’s learned.

The growing older workforce

Roughly one-in-five Americans 65 and older (19%) were employed in 2023, nearly double the share 35 years ago, according to the Pew Research Center report, “Older Workers Are Growing in Number and Earning Higher Wages.” The U.S. Bureau of Labor Statistics projects the 19% figure will inch up to 21% in 2032.

Several factors account for the rise in the 65+ employment rate, said Richard Fry, the senior researcher for that Pew study.

“The better educated you are, the more likely you are to have a job and today’s older adults are much better educated than 35 years ago. They’re also in better health, so that enables work,” Fry said.

In addition, he noted, Social Security’s Full Retirement Age was raised from 65 to 67 in 1983, likely inducing some older adults to continue working. “And many fewer workers have old-style pensions that often forced employees to retire at, say, 62, which was sort of a disincentive to continue working,” said Fry.

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Medicare and Peak 65

One factor leading some turning 65 to quit their full-time jobs: eligibility for Medicare at age 65.

“I’ve talked to many older people who say they are working 100% for their [employer’s] health insurance and plan to stay full-time until they turn 65,” said Hannon. Medicare has traditionally been “a big incentive to stay on the job until 65 and step out at 65.”

These days, stepping away from a full-time job at 65 increasingly means stepping into part-time work in unretirement.

Labor-force demographics are opening up part-time work opportunities for older workers.

“The big story is not just the number of people getting older. It’s the number of younger people coming into the workforce; there’s simply fewer of them,” said Bradley Schurman, author of “The Super Age.” That trend is expected to continue for the foreseeable future.

Read: Working longer won’t solve the retirement crisis — seniors need a ‘Gray New Deal’ to retire with dignity, this economist says

More pathways for older workers

Said Vanderburg: “With larger numbers of people who are turning 65 moving away from full-time work, for an employer that means: ‘If I had these five full-time jobs, now I have 10 part-time jobs.’”

Schurman believes the tight labor market is opening more pathways to employment for older workers.

Said Hannon: “Older workers still have a card in this game that they can play.”

That’s good for the U.S. economy, too, said Fry.

“A growing economy requires a growing labor force and older adults are playing a large role in labor force growth,” he noted. “To the extent that older Americans continue working, they also continue to pay certain kinds of taxes and some of them will delay receipt of their Social Security benefits, which probably helps the nation’s fiscal position.”

The disconnects at work

Employers have generally been slow in adapting their labor policies and benefits to serve the growing numbers of people who’d like to work fewer hours and flexibly.

In the latest Principal Financial Well-Being Index, 52% of retirees surveyed said their employer did not understand their needs as they moved toward retirement.

“Employers have probably done a pretty good job on focusing on retirement savings needs. What we’re hearing from employees is it’s much broader than that,” said Chris Littlefield, president of retirement and income solutions at Principal.

Littlefield believes that many HR staffers understand the tectonic plate shifting of workforce demographics and the need to address them.

Schurman, a forecaster and strategist at his Human Change firm, agrees. But he thinks the managers who actually make hiring decisions don’t get it.

The front-line bosses, he said, are often trying to fill positions “with people who kind of look and feel like that them. And a lot of that, of course, is age bias.”

Time for change

Businesses must alter their work policies, Littlefield said.

“I think employers need to find more flexibility in how they work with their employee population to address both the significant knowledge transfer that’s going to happen as people continue to decide to leave the workforce as well as succession planning.”

Benefits also need to become more personalized for Peak 65, to deal with older workers’ needs.

“Some have healthcare situations, some want to work but only part-time or three-quarters time,” Littlefield said.

According to The Wall Street Journal, a small number of employers have begun offering “grandternity leave” — paid leave to grandparents when their grown kids give birth or adopt.

But new thinking like this means some companies will have to toss out their ageist views and policies.

A January 2024 World Economic Forum longevity-economy report emphatically urged employers to create inclusive working environments for all generations.

One of its six principals: “As the share of the working-age population declines as society ages, companies need to evolve their job designs for flexibility to provide older individuals who wish to continue working with the ability to remain employed for longer.”

Workers who are a tad too young to be Peak 65 will likely make this change a reality.

Different views of retirement by boomers and Generation X

The Principal Financial Well-Being Index found a sharp difference between what boomers and Gen Xers said about retirement and work.

Among boomers surveyed, 40% want to gradually decrease their time working and 60% want to retire by stopping work entirely. But among Gen Xers, a striking 67% want to gradually phase out of working.

“The boomers prefer sort of an end date. I think there’s a mindset shift that’s happening in Gen X — and millennials — who say, ‘Yeah, I want to work and I want to be fulfilled, but I want to do it with flexibility to accommodate my bigger life,’” said Littlefield. “They’re preferring a more phased, de-escalation offboarding approach to retirement.”