In the waning days of the lame duck session, Congress appears likely to take a significant step toward helping to keep older working Americans in the labor force, at a time when shortages are hamstringing the economy.

By pushing back, to 75 from 72,  the age at which “required minimum distributions” must start to be made from 401Ks, IRAs, and other retirement accounts, in which funds accumulate tax-free, Congress will reduce a financial disincentive for those who stay in the workforce.

It will help those who’d rather work than not but may face a high marginal tax rate on their 401k and IRA distributions if they also have earned income. It’s a good start — but more can be done. We worry — rightly — about work disincentives faced by the poor.  But older working people who do the math face their own barriers.

First, some important context.  Although the share of those over 65 (and especially over 75) in the workforce is growing, it’s nonetheless projected to be just 9.5 percent by 2030, the Bureau of Labor Statistics reports.  At a time when the economy needs those with experience, this is too low.

But those doing their math may be disinclined to defer retirement.

It’s become conventional wisdom that it makes sense (and dollars) to defer taking social security until the mandatory age of 70, when monthly payments are highest.  

Yet former Social Security Administration trustee Andrew Biggs has repeatedly pointed out that such decisions overlook the fact that older working people must continue to pay into the social security system, due to the Federal Insurance Contribution Act.  

Mr. Biggs has found that “for each dollar of additional payroll taxes a near-retiree pays into the system, he or she receives only around 2.5 cents in extra lifetime benefits.” In other words, those paycheck deductions cancel out the benefits of deferring retirement to 70 from age 62 (the minimum).

Biggs has proposed ending these payroll deductions for those over 62 in order to keep them in the workforce — and contributing as state and local  taxpayers. The effect could be significant. A 10 percent increase in income could lead to an 18 percent increase in near-retiree workforce participation, a 2005 Chicago Fed study found. 

But payroll taxes aren’t the only problem.

Those who continue to work but are self-employed and participating in Medicare, must pay higher premiums.  No, Medicare is not necessarily inexpensive. 

What’s  more, those who continue to work even after they’re forced to take social security at age 70, must pay a higher tax rate on their combined earnings and “pension” payments. (Yes, social security payments are taxed.) 

And near-retirees must continue to pay federal disability insurance tax — despite the fact that, once  they do retire and receive the maximum social security payments, they will not be eligible for disability status. 

Then there are those pesky IRA distributions.  Even if they are put off until age 75, those who continue to work will find they are taxed at an income tax rate pushed higher by their earnings. 

There’s a deeper issue in all this than workforce participation, as important as that is. As the dementia rolls and related expenses grow, we are learning that the active brain can remain healthy.  Older Americans need not just income but purpose. Lowering financial barriers to keeping a job can help them find it.