Thinking of retirement? Think again

'I don't know what I would do if I didn't work," said a 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 65 and older has increased dramatically.

According to the U.S. Bureau of Labor Statistics, employment of workers in that age category increased 101 percent between 1977 and 2007, compared to a much smaller increase of 59 percent for total employment (16 years and older). In the past 10 years, the number of employed workers 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.

As noted in a previous column, the 2012 Employee Benefit Research Institute's Retirement Confidence Survey found that in 1991, 11 percent of workers said they expected to continue working after age 65. In 2012, that number has grown to 37 percent.

While many retirement-age people keep working or anticipate they will have to be employed because of economic need, you may be surprised to know that older workers head to the office for lots of other reasons.

The institute found that 92 percent of those who worked beyond the traditional retirement age of 65 did so because they wanted "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 they may not realize that 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 rejoin 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 more.

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 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 also are 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.

Jill Schlesinger is the editor at large for CBSMoneyWatch.com and writes this column for Tribune Media Services.