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An inconvenient truth: The road to retirement means working longer

Stan Litow
Stan Litow

The days of traditional retirement may be over.

Potential retirees at the lower and middle end of the economic spectrum simply can't afford to stop working, given the high costs of health care and housing, especially when you consider that only 1 in 3 Americans have access to retirement benefits through their employer.

That means that a larger and larger percentage of Americans at or near retirement age need to work longer and longer. In fact, only about 20% of Americans expect to stop working at the traditional retirement age, according to Pew Research.

Sadly, given their education and skill levels, the jobs that they are qualified for and may be able to fill are likely to be at wages lower than they earned previously. A recent Urban Institute study using Labor Department data found that of the 40 million Americans age 50 or above in the workforce, 22 million are facing forced retirement and 90% will earn less than they did before.

More and more of the jobs being created require more and more education and skill levels. According to studies by Anthony Carnevale at Georgetown University, the percentage of jobs requiring a postsecondary degree jumped to 60% in 2008 from 28% in 1973, and that number only continues to increase.

A skills shortage

All too often, the required education and skill levels are in short supply for those entering the workforce. The situation is even worse for those nearing retirement age who need to keep working longer to cover their living expenses.

And this problem is becoming even more troubling as more employers force people out of the workforce between ages 50 and 60. Often, it's not because of their age, but for a more compelling reason; a lack of education and the necessary skills to stay employed.

Potential retirees at the lower and middle end of the economic spectrum simply can't afford to stop working, given the high costs of health care and housing.

Without a solution this problem is likely to exacerbate an economic storm cloud.

The skills crisis runs the risk of slowing economic growth, leaving employers without the workforce they need to sustain economic stability. Perhaps even more troubling is that those workers who had been thinking of retirement are forced out of their jobs early due to their lack of education and skills and are left to toil at ever lower wages.

So what actions should be taken?

While saving for retirement (a staple of retirement planning) is sound advice, so is investing in education and skills. And putting the focus on skills and education is directly connected to keeping older workers employed longer or having the credentials likely to benefit them in an "encore career" job search.

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Employers who obsess about the inability to find people entering the workforce with the right skills should think long and hard about making investments in building both the education and abilities of those in their workforce now.

Those investments will likely pay an economic return in the long run that's greater than the "replacement" costs.

Public-private partnerships

Finally, this is an opportunity for some innovative public-private partnerships.

Let's call it " Apprenticeship 2.0," where the government might actually share the cost of education and improving worker skills. Keeping more employees in the workforce longer has another benefit in the form of higher tax revenues and less strain on government-funded social services.

When storm clouds gather, those who plan actions in advance always benefit more than those who begin their planning when the rain starts falling.

Stan Litow is a professor at Duke and Columbia University, and innovator in residence at Duke. He is the author of "The Challenge for Business and Society: From Risk to Reward."

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Check out 4 Money Lessons Everyone Should Know by Age 25 via Grow with Acorns+CNBC.

Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.