Americans 65 or older twice as likely to work now than in 1985
Just as single-income families began to vanish in the past 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 health care costs are all conspiring to make retirement a more difficult decision.
For the first time in 57 years, the participation rate in the labor force of retirementage workers has cracked the 20 percent 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 percent back in early 1985. The biggest spike in employment has gone to collegeeducated older workers; the share of all employees age 65 or older with at least an undergraduate degree is now 53 percent, up from 25 percent 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 percent higher than the $48,000 older folks brought home in 1985. By comparison, American workers below the
Teresa Ghilarducci, an economics professor at the New School for Social Research, has estimated that Social Security replaces about 40 percent to 50 percent of pre-retirement income for many people. The general thinking is that people need around 80 percent of pre-retirement income to get by after they stop working.
age of 65 saw their average income rise by only 38 percent over the same period, to an average of $55,000. United Income’s calculations draw on recently released data from the U.S. Census Bureau and the Bureau of Labor Statistics.
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 President Barack Obama’s 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 Bureau of Labor Statistics 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 Bureau of Labor Statistics report noted. “And some of them are expected to continue working even after they qualify for Social Security benefits.”
Teresa Ghilarducci, an economics professor at the New School for Social Research, has estimated that Social Security replaces about 40 percent to 50 percent of pre-retirement income for many people. The general thinking is that people need around 80 percent of preretirement income to get by after they stop working.
The typical worker in the bottom 50 percent of the income distribution, earning less than $40,000 a year, has no retirement savings. Those in the middle 40 percent 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 percent 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.”
The financial condition of the government’s bedrock retirement programs for middle- and workingclass Americans remains shaky, with Medicare pointed toward insolvency by 2026, according to a report Monday by the government’s overseers of Medicare and Social Security.
It paints a sobering picture of the programs, though it’s relatively unchanged from last year’s update. Social Security would become insolvent in 2035, one year later than previously estimated.
Both programs will need to eventually be addressed to avert automatic cuts should their trust funds run dry. Neither President Donald Trump nor Capitol Hill’s warring factions have put politically perilous cost curbs on their to-do list.
Many on both sides actually agree that it would be better for Washington to act sooner rather than later to shore up the programs instead of waiting until they’re on the brink of insolvency. The latest report from the government’s overseers of Medicare and Social Security show the financial condition of the bedrock retirement programs for middle- and working-class Americans remains shaky.
The report by three Cabinet heads and Social Security’s acting commissioner, urges lawmakers to “take action sooner rather than later to address these shortfalls, so that a broader range of solutions can be considered and more time will be available to phase in changes while giving the public adequate time to prepare.”
If Congress doesn’t act, both programs would eventually be unable to cover the full cost of promised benefits. With Social Security that could mean automatic benefit cuts for most retirees, many of whom depend on the program to cover basic living costs.
For Medicare, it could mean that hospitals, nursing homes, and other medical providers would be paid only part of their agreed-upon fees.