Improved health,
changing job characteristics and Social Security rules are responsible for the
graying workforce
Oct
24, 2019 @ 11:40 am By Mary
Beth Franklin
Over the past two
decades, the share of older workers increased by
about one-third as more women continued to join the workforce and fewer men
retired early, according to a new Congressional Budget Office report that examines
why more seniors are working longer. The report offers some interesting
insights into the trend.
After declining for decades, the
share of people in the United States from ages 55 to 79 who were employed began
to increase in the mid-1990s. In 1995, 33% of people in that age range worked.
By 2018, 44% did.
The changes in the level of
employment of people from ages 55 to 79 — the period during which many people
stop working — were related to changes in their demographic characteristics,
such as improved health and increased education; a shift away from
labor-intensive blue-collar jobs; and changes in Social Security rules, the CBO
report found.
During that same period, the
prevalence of both defined-benefit retirement plans and health insurance for
retirees decreased. Those changes also are associated with workers' staying on the job
longer as a way to boost their savings and delay retirement
until they qualify for Medicare at 65.
In fact, a new study from
the Center for Retirement Research at Boston College found that the only way to
make dramatic progress in reducing the percentage of working-age households
that are at risk of falling short in retirement is to boost 401(k)
contributions by 5 percentage points and to work two years longer.
Evolving Social Security policies
over the years have also made working in one's 60s more attractive, the CBO
said.
Between 1990 and 2018, the age at
which people become eligible for full retirement benefits increased, thereby
increasing people's incentive to delay claiming their benefits and stay
employed longer. The full retirement age has gradually risen from 65 (for those
born before 1938) to 66 (for those born from 1943 through 1954) and eventually
will increase to 67 (for those born in 1960 and later).
In addition, the parameters of
the retirement earnings test have
been relaxed over the years. The earnings test determines to what extent
benefits are temporarily withheld for Social Security claimants of certain ages
whose earnings are above certain thresholds.
In the early 1980s, the oldest age at
which wages were subject to earnings restrictions fell from 71 to 69. In 2000,
that age was further reduced to full retirement age, which was 65 at the time
and later rose to 66.
In 2019, someone who is under full
retirement age for the entire year and who continues to work can earn up to
$17,640 without losing any Social Security benefits. Earnings above that limit
temporarily reduce their Social Security benefits by $1 for every $2 over the
limit.
In the year they reach their full
retirement, there is a more generous limit. In the months preceding their 66th
birthday, they can earn up to $46,920 and would forfeit just $1 in benefits for
every $3 earned over the limit in 2019. The earnings restrictions disappear at
full retirement age and any forfeited benefits would be restored in the form of
higher monthly benefits in the future.
Lowering the oldest age at which
earnings are subject to the test allowed more people to claim their full Social
Security benefits while they continued working.
For example, people in their 60s with
annual earnings of $50,000 and annual Social Security benefits of $20,000 who
were born in 1910 would have had most of their benefits temporarily withheld if
they claimed them between age 62 and 70 because of the lower earnings cap and
higher age limit in effect at the time. People with the same characteristics
who were born in 1950 could collect their full retirement benefit at age 66 and
were no longer subject to the earnings test.
A separate survey conducted for
Provision Living Senior Living Communities in St. Louis also looked at why
people are working longer. The survey, conducted in August, asked more than
1,000 people between the ages of 65 and 85 why they continue to work either
full- or part-time. The average age of those surveyed was 67 and respondents
were 60% male and 40% female.
More than 60% of the respondents in
the Provision Living survey said they continue to work for financial reasons,
including not being able to afford retirement (37%), supporting a family (23%),
paying off debt (19%) or a mortgage (13%), or saving for a big expense (4%).
The remaining respondents,
representing 32% of those surveyed, said they continue to work for personal
reasons such as enjoying working (45%), preventing boredom (18%), shifting to
part-time employment (6%) or avoiding loneliness (6%).
The average retirement savings of the
seniors in the Provision Living survey who are still working is about $133,000.
Average savings are higher among college-educated respondents ($169,000) and
lower for seniors without a college education ($80,000).
Most of the working seniors
said Social Security will
be their primary source of income after retirement (70%), followed by pension
and 401(k) income (37% each), personal savings (27%), stocks (20%) and support
from family (11%).
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