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
Married couples don’t necessarily know what the other spouse is thinking about retirement.
This insight came out of a new Fidelity Investments survey that asked some 1,600 people if they knew when their significant other planned to retire. Only 43 percent answered the question correctly. This disconnect reveals just how few couples are talking about retirement, said Fidelity spokesman Ted Mitchell, who worked on the survey.
Fidelity’s survey went out to adults of all ages, so the younger ones no doubt felt they’re too young to be thinking – much less talking – about what their lives will be like decades from now.
But things change as couples age. When retirement comes into sharper focus, it’s natural to start talking through the options – mine, yours, and ours.
One option is to retire around the same time, and prior research has shown that roughly half of older couples do so.
New research takes a more nuanced look at how couples retire and finds a more complicated picture. Mixed arrangements are common in the pre-retirement years. Perhaps one spouse continues working full-time, even though their partner has retired, or one spouse might shift down to part-time work while the other is either still in a full-time job or has already retired.
Two sentiments are usually in conflict when older workers are trying to decide whether to retire: a longing for more leisure time and a need to bank more in savings, Social Security, and pensions.
Spouses often influence one another’s retirements for a variety of reasons, including their health, their relative ages, and how much each one likes their job. But financial security is usually a major consideration. …Learn More
A dramatic decline in widow’s poverty over a quarter century has been a positive outcome of more women going to college and moving into the labor force.
Yet 15 percent of widows are still poor – three times the poverty rate for married women.
A new study by the Center for Retirement Research takes a fresh look at Social Security’s widow benefits and finds that increasing them “could be a well-targeted way” to further reduce poverty.
Widows are vulnerable to being poor for several reasons. The main reason is that the income coming into a household declines when the husband dies. The number of Social Security checks drops from two to one, and any employer pension the husband received is reduced, or even eliminated if the couple didn’t opt for the pension’s joint-and-survivor annuity.
While one person can live more cheaply than two, the drop in income for new widows often isn’t accompanied by a commensurate drop in expenses.
Another issue begins to develop as much as 10 years before a husband dies. Prior to his death, his declining health may increase the couple’s medical expenses and reduce his ability to work, depleting the couple’s – and ultimately the widow’s – resources.
The irony today for wives who worked is that their decades in the labor force generally improve their financial prospects when they become widowed. Yet, under Social Security’s longstanding design, they receive less generous benefits than housewives – relative to the household’s benefits prior to the husband’s death. …Learn More
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
Walter Mischel, who used marshmallows to test children’s ability to delay gratification, died recently, but his lesson never grows old.
For those who aren’t familiar with his famous test, a young girl or boy sits at a table with a single marshmallow on a plate. The tester tells the child that he or she can eat the marshmallow right away, but waiting to eat it until the tester comes back into the room will bring a big payoff: a second sweet, puffy morsel.
Watching the children in this video squirm as they wrestle with their decisions brings to mind the adult equivalent. A desire for immediate self-gratification can come at the detriment of any number of personal financial decisions.
Like the marshmallow test, consuming now means having less money in the bank later. The test also applies to deciding when to retire. Retiring becomes extremely tempting for baby boomers who want to escape from work after decades in the labor force. But those who wait patiently for a few more years will have a sweeter retirement: a much larger Social Security check and more 401(k) savings distributed over fewer total years in retirement.
Children, when faced with the marshmallow test, struggle mightily to exercise self-control. They pick up the marshmallow to examine it, play with it, nibble it, and move it out of reach – but impulse gets the better of them, and they pop it into their mouths.
The lesson here is the same for children and adults: resist temptation and be rewarded. …Learn More
Men with high school diplomas are retiring around age 63 – three years before college-educated men. The gap in their retirement ages used to be smaller.
The reasons behind the current disparity are explained in a review of research studies on the topic by Matt Rutledge, an economist with the Center for Retirement Research. The trend for women is similar, though their story is complicated by a sharp rise in their participation in the labor force in recent decades.
Rutledge provides four reasons that less-educated men are still the lion’s share of early retirees:
Health. Older Americans are generally getting healthier and living longer – so why not wait to retire? Well, the health of less-educated people is poorer and has improved less over time than their more-educated coworkers. And health problems trump unemployment and other types of job losses as the single biggest reason for their early retirements – more so than for better-educated workers.
Labor Market. Two aspects of the labor market are relevant to less-educated workers. In the past, a large share of the retiree population could count on a guaranteed monthly income from a pension. Today, the workers who have a retirement savings plan have an incentive to delay retirement, because they will have to rely on the often inadequate and uncertain income that can be withdrawn from their 401(k)s. But less-educated workers haven’t been affected very much by the change, because they’ve never been big beneficiaries of employer retirement plans. In the 1990s, they could claim just 11 percent of the value in pensions, and today they hold 11 percent of the wealth in 401(k) plans.
A second change in the labor market is plummeting U.S. manufacturing employment since the 1980s, which reduced the physical demands of work. But myriad working conditions remain relatively poor for less-educated workers and are still a powerful reason for them to retire. …Learn More