October 10, 2019
What’s Driving the Longevity Gap
The decline in U.S. life expectancy is unlike anything we’ve seen
Bombshell headlines like this popped up in major news outlets last November after the government reported that life expectancy in 2017 fell for the third year in a row.
This is a troubling break from the steady improvements in lifespans since 1900, which were powered by a combination of medical breakthroughs and healthcare policy. Early in the 20th century, antibiotics dramatically increased infant lifespans. Later, new treatments like statins and stents, as well as expanded access to healthcare through Medicare and Medicaid, increased life expectancy across the age range.
But there’s another story behind this story: life expectancy very much depends on where one falls on the economic ladder.
Between 1979 and 2011 – prior to the very recent fall in longevity – the increase in lifespans was much larger for more educated, higher-earning Americans than the gains for people with less education and lower incomes, according to a study by the Center for Retirement Research (CRR).
Smoking is an important factor in this socioeconomic divide. The decline in smoking and cardiovascular disease greatly contributed to rising longevity in the latter half of the 20th century. But while all Americans are smoking less today, those in lower socioeconomic groups still smoke much more. Today, one in four of them is a smoker, compared with just one smoker for every 10 people who attended college, the CRR found.
Looking ahead, education will remain a clear dividing line, and life expectancy will continue to depend crucially on the future prevalence and impact of smoking, as well as obesity, CRR predicted. …Learn More
August 15, 2019
Walk? Yes! But Not 10,000 Steps a Day
A few of my friends who’ve recently retired decided to start walking more, sometimes for an hour or more a day.
Becoming sedentary seems to be a danger in retirement, when life can slow down, and medical research has documented the myriad health benefits of physical activity. To enjoy the benefits from walking – weight loss, heart health, more independence in old age, and even a longer life – medical experts and fitness gurus often recommend that people shoot for 10,000 steps per day.
But what’s the point of a goal if it’s unrealistic? A Centers for Disease Control study that gave middle-aged people a pedometer to record their activity found that “the 10,000-step recommendation for daily exercise was considered too difficult to achieve.”
Here’s new information that should take some of the pressure off: walking about half as many steps still has substantial health benefits.
I. Min Lee at Brigham and Women’s Hospital in Boston tracked 17,000 older women – average age 72 – to determine whether walking regularly would increase their life spans. It turns out that the women’s death rate declined by 40 percent when they walked just 4,400 steps a day.
Walking more than 4,400 steps is even better – but only up to a point. For every 1,000 additional steps beyond 4,400, the mortality rate declined, but the benefits stopped at around 7,500 steps per day, said the study, published in the May issue of the Journal of the American Medical Association.
More good news in the study for retirees is that it’s not necessary to walk vigorously to enjoy the health benefits. …Learn More
March 21, 2019
Men Who Work Longer, Live Longer
In 2007, the majority of workers in The Netherlands were retiring by their early sixties to take advantage of the country’s generous pension scheme. Then came a sweeping 2009 policy that rewarded older workers with a tax break if they remained employed and active.
In a new study, researchers used this tax break – the Doorwerkbonus, or continued work bonus – to ask the question: do people who worked longer in response to this policy also live longer? The short answer is “no” for women but “yes” for men. Delaying retirement increased men’s lifespans by three months, compared with a group that was not eligible for the bonus, possibly because working longer improved their health.
The tax break was the equivalent of a wage increase for all older workers in every sector of the Dutch economy. The bonus started as a 5 percent tax cut for working people in the year they turned 62, increased to 7 percent at 63, and 10 percent at 64. After that, the rewards from work dwindled, falling to 1 percent for everyone over 67. (In 2013, the size of the tax break was reduced.)
Prior to the new study, other researchers had examined whether earlier retirements caused people to die younger. But Alice Zulkarnain and Matthew Rutledge at the Center for Retirement Research took the opposite tack. They asked: were the Dutch living longer because they delayed retirement after the Doorwerkbonus went into effect?
While the policy did increase men’s life spans slightly, women seemed unaffected, because fewer of them responded to it by working longer.
Is there a lesson in the Doorwerkbonus for American boomers? This study indicates that working longer will not only put more money in retirees’ pockets, it might also add to their life spans. …Learn More
January 31, 2019
How Long Will Retirement Savings Last?
It might be the most consequential issue baby boomers will deal with when they retire: did I save enough?
Vanguard’s free online calculator will estimate that for you, using the same sophisticated technique financial advisers charge hundreds of dollars to provide.
The user-friendly calculator uses 100,000 of what are called Monte Carlo simulations of potential future returns to the financial markets to arrive at the probability that a household’s invested savings will last through the end of retirement. To get to this number, older workers enter their information into the calculator – 401(k) account balance, asset allocation, estimated years in retirement, and annual withdrawals – by moving around a sliding scale for each input.
The financial industry recommends aiming for a probability in the 80 percent range – 95 percent is overdoing it. In the end, however, your comfort level is a personal decision.
An important purpose of the calculator is to demonstrate how changes in the inputs can hurt one’s long-term retirement prospects – or improve them. One obvious example is increasing the annual withdrawal amount, which lowers the probability the money will last. To increase your chances, try a later retirement date.
The calculator is a lot of fun, but it has some limitations.
First, it’s no substitute for a detailed pre-retirement financial review. The other issues are primarily mathematical, and they boil down to the difficulty of predicting the future.
The calculator assumes, for simplicity, that a retiree withdraws the same dollar amount from savings every year to supplement Social Security and any pension income. But Anthony Webb, an economist at the New School for Social Research in New York, said this ignores the most important thing retirees should do to preserve their money: adjust the withdrawals every year, depending on how their investments have performed.
“If you encounter icebergs (bear markets), you should cut your spending” and withdrawals, he said. …Learn More
November 29, 2018
Boomers Find Reasons to Retire Later
It is one of “the most significant labor market trends” in the United States, says Wellesley College researcher Courtney Coile.
She’s referring to big increases since the 1980s and 1990s in the share of older Americans in the labor force, including one in three men in their late 60s.
As for women, the baby boomers were really the first generation to thoroughly embrace full-time employment. Older women’s participation in the labor force hasn’t quite caught up with their male coworkers, but they’ve made impressive strides since the 1980s and have rapidly closed the retirement-age gap.
Given the implications of this trend for retirement security – the longer people work, the better off they’ll be – Coile and many other researchers have investigated what’s driving it. They agree on several things that are changing the retirement calculation.
College. College graduation rates have increased dramatically over the past few decades, and people who’ve spent at least some time in college tend to remain in their jobs longer. This trend has played a big role in the increase in baby boomers’ participation in the labor force, Coile said.
Social Security. Three major reforms to the program have boosted U.S. retirement ages. A 1983 reform is slowly increasing the age at which workers are eligible to receive their full benefits, from 65 for past generations to 67 for workers who were born after 1959. This amounts to a significant benefit cut at any given age that a retiree claims his benefits. Various studies show that this has created an incentive to delay signing up for Social Security in order to increase the size of the monthly benefit checks.
The 1983 legislation also played a role in pulling up the average retirement age by providing larger monthly benefit increases for people who delay Social Security beyond their full retirement age. In 2000, a third reform ended the temporary withholding of some benefits that had been in place for people in their late 60s who worked while simultaneously collecting Social Security.
Employer retirement plans. Two employer benefits that encourage people to retire at relatively young ages have largely gone by the wayside in the private sector. …Learn More
October 25, 2018
Longevity Affects Social Security Benefit
It’s long been known that people with high earnings tend to live longer than low earners. But this gap in life expectancy has widened into a gulf.
For example, high-earning men born back in 1912 lived about eight months longer than their counterparts in the bottom half of the income range. This longevity gap increased to five years for men who were born in 1941 and are now in their late 70s. The disparity for women is similar, but not as extreme.
This growing longevity gap has important implications for Social Security. The program’s intent is to be progressive – more generous to lower-income retirees. But the unequal life spans have significantly reduced that progressivity, concludes Matt Rutledge in a new synopsis of research in this area for the Center for Retirement Research, which sponsors this blog.
The reason low-income workers are losing ground is that they don’t live as long, so they don’t collect Social Security for as many years as high-income workers do.
A study by the National Academy of Sciences, one of several demonstrating the decline in the program’s progressivity, found that the value of lifetime Social Security benefits, adjusted for inflation, increased nearly 30 percent for the highest-income retirees born in 1960, compared with the top earners born 30 years earlier. But benefits either fell or stagnated over that time for retirees on the lowest two tiers of the income scale – the people who rely far more on Social Security. …Learn More