Suzanne Woolley Bloomberg
News April 22 2019, 10:46am EDT
Just as single-income families began to vanish
in the last century, many of America’s elderly are now forgoing retirement for
the same reason: They don’t have enough money. Rickety social safety nets,
inadequate retirement savings plans and sky high healthcare costs are all
conspiring to make the concept of leaving the workforce something to be more
feared than desired.
For the first time in 57 years, the
participation rate in the labor force of retirement-age workers has cracked the
20% mark, according to a new report from money manager United Income. As of
February, the ranks of people age 65 or older who are working or seeking paid
work doubled from a low of 10% back in early 1985. The biggest spike in
employment has gone to college-educated older workers; the share of all
employees age 65 or older with at least an undergraduate degree is now 53%, up
from 25% in 1985.
This rise of college-educated older workers
has pushed the demographic’s inflation-adjusted income up to an average of
$78,000, 63% higher than the $48,000 older folks brought home in 1985. By
comparison, American workers below the age of 65 saw their average income rise
by only 38% over the same period, to an average of $55,000. United Income’s
calculations draw on recently released data from the Census Bureau and the
Bureau of Labor Statistics (BLS).
There’s a mismatch between older workers who
need the income the most and those who are able to work and working, said
Elizabeth Kelly, senior vice president of operations for United Income and a
former special assistant to the president at the White House National Economic
Council during the Obama administration.
“These are the more educated, wealthier
individuals in better health who are continuing to work, but it’s probably
their less-educated, working-class counterparts who need to work the most,”
Kelly said.
The BLS expects the big wave of aging baby
boomers to represent the strongest growth in the labor force participation rate
through at least 2024. “By 2024, baby boomers will have reached ages 60 to 78,”
a BLS report noted. “And some of them are expected to continue working even
after they qualify for Social Security benefits.”
The retirement math is ugly, even for those
who are seemingly well-off. Teresa Ghilarducci, an economics professor at the
New School for Social Research, has estimated that Social Security replaces about
40% to 50% of one’s pre-retirement income. The general thinking is that people
need around 80% of pre-retirement income to get by after they stop working.
(Online retirement calculators can give a rough sense for what you need to
save, and earn on savings, to get there.) The typical worker in the bottom 50%
of the income distribution, earning less than $40,000 a year, has no retirement
savings. Those in the middle 40% of income distribution, earning from $40,000
to $115,000, have a median amount of $60,000 saved, according to Ghilarducci’s
research. Workers in the top 10% of income distribution making more than
$115,000, meanwhile, have a median amount of $200,000 saved. They, too, are
woefully under-saved, although it’s worth noting that these calculations don’t
include real estate and other tangible assets, or the chance of an inheritance.
Ghilarducci’s rough estimate of what a typical college-educated professional
must amass to retire fairly comfortably? “Over $1 million or 2.” No wonder more
people are working longer.
Bloomberg News
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