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Will You Work Forever?

Read enough science-fiction books, and you'll quickly become familiar with a utopian vision of the City of the Future, in which technology has made production so efficient that human beings can work half-days, and spend the rest of their time designing unitard suits and tinkering with robots.

In the City of Reality, however, a long-term trend that saw retirement ages declining for almost a century appears to be ending, or maybe even reversing. Women, in particular, have been entering the workforce in droves in their 50s and early 60s, according to a paper published by the Center for Retirement Research at Boston College.

What's driving this trend? It may in part be that we're living longer, happier lives, and we want to be productive in our later years. At the same time, the paper identifies a number of economic changes that have made it more attractive to work longer. The analysis provides a good reality check for those of us who hoped to retire early in the age of robots and flying cars. See how many of these factors might keep you working into your older years.

Social Security
Over time, Social Security has eased its penalties for collecting benefits while still earning money. The earnings test -- which reduces your benefits according to your work income -- starts to apply at age 62. You can earn $12,960 this year before you start losing $1 in Social Security benefits for every additional $2 in employment pay. However, once you reach your full retirement age, the earnings penalty disappears. For many retirees, that means they can wait until full retirement age to take their Social Security benefits, continue working, and face no penalty.

If you keep working after full retirement age, you could stand to gain even more. If you delay taking your Social Security benefits, you can keep accumulating credits until age 70, and you'll get a higher payout when you start getting checks. In other words, Social Security makes it pay for some people to keep on working.

Pensions
Around 1980, about half of all workers were covered by a traditional pension. It's no news flash that pensions have been going the way of the dodo, replaced by defined contribution accounts like 401(k)s. Researchers have found that workers with 401(k)s retire one or two years later, on average, than workers who can count on a monthly pension check. It may stem from the variable returns on 401(k)-styled accounts, or the increased likelihood that those retirees will get their benefits in a lump sum. In general, the riskier retirement plans that force you to save for yourself may make it seem worth your while to work just a little bit longer.

Health care
Researchers have found that workers delay retirement until they know health insurance coverage will be available. Medicare's new prescription drug benefit may exacerbate that trend, especially with pharmaceutical companies like Merck (NYSE: MRK  ) and Pfizer (NYSE: PFE  ) fighting the prospect of drug price controls in the U.S. If you're counting on your company to pick up your health tab when you're retired, think again. Retiree health coverage has been one of the benefits businesses have been quickest to drop, while also passing on higher health-insurance costs to their current employees.

All of this led the researchers to conclude that retirement ages may continue to rise. So much for the leisurely City of the Future!

If early retirement's on your wish list, start preparing now. Head over to the Retirement Center for the basics, and investigate the Rule Your Retirement newsletter for in-depth help. There's also a slew of discussion boards dedicated to all things retirement, including several for those who have retired early, or those who want to.

A recent poll on the Retire Early discussion board showed that many people checking in on that thread plan to retire by 55 or 60 years old. A few have even set their sights set on checking out of the working world at age 40. Maybe they'll have time to tinker with those robots.

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Fool contributor Mary Dalrymple welcomes your feedback. She doesn't own shares of the companies mentioned in this article. Pfizer is an Inside Value pick, while Merck is a former Income Investor selection. The Motley Fool has a disclosure policy.


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