8 reasons older people are working longer
Many older Americans keep working because they can. They also have strong financial incentives.
This post comes from Alicia Munnell at partner site SmartMoney.
Since working longer is the key to a secure retirement for the vast majority of older Americans, it's useful to take a look at labor force trends for men under and over 65 for the last century or so. (The focus is on men because women's patterns reflect both their increasing labor force participation over time as well as their shifting retirement behavior.)
The notion of retirement as a distinct and extended stage of life is a recent innovation. Up to the end of the 19th century, people generally worked as long as they could. At the end of the 19th century, an unexpected and substantial stream of income appeared in the form of old-age pensions for Civil War veterans that allowed people to stop working. For a variety of reasons, work rates did not return to their previous levels as the veterans died off.
The next big decline in the work rates of older people occurred after World War II. One obvious factor was the availability of Social Security benefits and the expansion of employer pensions. The introduction of Medicare in 1965 and the sharp increase in Social Security benefits in 1972 probably led to the final leg of the decline in workforce activity of older men. And because benefits were available at 62, Social Security may also explain part of the decline in labor force activity for men 55-64. Post continues after video.
The downward trajectory stopped around 1990, and since then the labor force participation of men both 55-64 and 65 and over has gradually increased. Many factors help explain this turnaround:
- Social Security. Changes to Social Security made work more attractive relative to retirement. The liberalization and, for some, the elimination of the earnings test removed what many saw as an impediment to continued work. The delayed retirement credit, which increases monthly benefits for each year that claiming is delayed between the full retirement age and 70, has also improved incentives to keep working.
- Pension type. The shift from defined benefit to 401k plans eliminated built-in incentives to retire. Studies show that workers covered by 401k plans retire a year or two later on average than similarly situated workers covered by a defined benefit plan. (How much money will your 401k provide? Try MSN Money's calculator.)
- Education. People with more education work longer than those with less. Over the last 30 years education levels have increased significantly, and the movement of large numbers of men up the educational ladder helps explain the increase in participation rates of older men.
- Improved health and longevity. Life expectancy for men at 65 has increased about 3.5 years since 1980, and much of the evidence suggests that people are healthier as well. The correlation between health and labor force activity is very strong.
- Less physically demanding jobs. With the shift away from manufacturing, jobs now involve more knowledge-based activities, which put less strain on older bodies.
- Joint decision-making. More women are working, wives on average are three years younger than their husband, and husbands and wives like to coordinate their retirement. If wives wait until age 62 to retire so that they qualify for Social Security, that pattern would push husbands' retirement age toward 65.
- Decline of retiree health insurance. Combine the decline of employer-provided retiree health insurance with the rapid rise in health care costs, and workers have a strong incentive to keep working and maintain their employer's health coverage until they qualify for Medicare at 65.
- Non-pecuniary factors. Older workers tend to be among the more educated, the healthiest, and the wealthiest. Their wages are lower than those earned by their younger counterparts and lower than their own past earnings. This pattern suggests that money may not be the only motivator.
Will the increase in labor force participation continue? The fact that all the incentives associated with the recent reversal remain in place argues for "yes." But there are risks -- the move away from career employment, the availability of Social Security at 62, and employer resistance to part-time employment. More on the risks later.
More on SmartMoney and MSN Money:
MORE ON MSN MONEY
VIDEO ON MSN MONEY
You want the simple truth about why alot of older Americans are working longer? We can't afford to retire.. some of us never will. Many of us live paycheck to paycheck and have for yrs. Not all of us have the adfvantage of being in a position to save. If I have to choose between utilities and food or putting money into savings, guess what wins out? I live very modestly, and barely hang on, and I know several people who aren't even doing as good as me.
Stop writing articles about retirement and investment.like everyone is well off.. you seriously need a reality check. Write articles about how to live well on $400 a week... Oh and then try to actually live on $400 a week, pay all your bills, buy everything you need to live.. gas groceries clothes etc .. in today's economy. Welcome to my world!!!
Seriously? Someone wrote an article about this? Older people working longer? The answer is simple and one everyone has heard but this writer apparently.....IT'S THE ECONOMY, STUPID!!!
Most of the older workers at my former company were laid off...
Mainly because they had more years of service, and received bigger pay checks...?
Might have something to do with the new company dress code...?
No Gray Hair....
The reason a lot of seniors are working is because of all the changes made to Social
Security. First off the Government has raised the age for full retirement so many times
that it will soon exceed the average life expectancy. Then when they do retire they have to
pay health insurance that can take a large portion of their monthly check. Retirement
isn't what it used to be and most Americans are forced to work until death because they
cannot afford to retire.
They worked hard all of their lives, many invested and lost thousands in their 401Ks,
Social Security is a failure so what else can they do?
Forgot a couple. Kids are not working and living at home. 401's and retirement packages were robbed. Those who have not been laid off are trying to make up for what business and our government has blundered. Those who were laid off cannot find job with "livable wages". Age discrimination is alive and well.
You can refer to all the fluff you want when writing these articles but the reality is, Global economics and what our political parties both endorsed back in the early 80's. Workforce 2000. JTPA and WIA were all smoke screens designed to fool Americans into think that global economics was a wonderful thing and that we who were effected would be re-trained for other work. Guys and gals, it goes on and on and on like the ever ready rabbit. We're FCKD.
Survival in this ridiculous economy is the name of the game and as a consequence, you have to work until you drop.
The Democrats and Republicans have robbed us blind!
Most of them are poor so they have to. There ain't no rest for the wicked or those that have minimal savings and income. If you worked and paid social security your entire life and it's not there when you it's time to retire then it's time to riot. Why do the politicians get life time benefits when most of them do very little good for our society and all most all of them are already independently wealthy and do not need the money? The politicians should cut their benefits before they cut others but I guess when you get to vote for your own raises and benefits then you can get away with whatever you want to even if it hurts the rest of society.
Many of societies greatest contributions have come and will continue to come from our older citizens. Our older generations in this country have a work ethic that has been lost on our younger citizens, my generation included. (gen x) The youth of America has grown soft and lazy...just try to get a kid to mow your lawn these days...yeah right..lol. These older Americans are not taking jobs away from our younger generations by staying in the workforce...the younger generations are just not as qualified, motivated and hardworking as their parents...let us be thankful that so many older people are working to support the youth of this country.
Overwhelmingly, the number one reason is that they CAN'T AFFORD TO RETIRE.
1) The 401k fiasco has proven over time to be about the biggest fraud perpetrated on the citizenry since homeowner's insurance when it rains. Nobody who isn't already rich is able to make this investment last more than a few years. 90%+ of workers could contribute for 200 years and not have enough. 6% of $20K will never add up to much of anything. I am a very experienced stock trader and can say with near certainty that the REAL purpose of the 401k sham was/is to supply a steady stream of liquidity to the markets for the "real players" to use as a cushion or hedge to any losses.
2) "...Their wages are lower than those earned by their younger counterparts and lower than their own past earnings. This pattern suggests that money may not be the only motivator..."
What planet are you from??????
Money IS the only motivator! It's just that you don't make as much as a Walmart greeter than you did as an engineer or as a factory worker with 30+ years of raises under his/her belt. They get fired (what "laid off actually means) in company RIF's along with many others who are 95% over 50 and would love to get similar jobs at similar pay but can't even get an interview.
3) "...Improved health and longevity..."
Yet another bit of spin! Just spend a few weeks looking at the daily obits. I've had more than one doctor and a few health care provider professionals confirm to me that these longevity statistics are a farce and simply untrue. It's because the sample populations are skewed toward wealthier people who DO live longer. If you only average them in, of course you get higher numbers. BUT - they are a fairly small part of the TOTAL population which hasn't seen these increases due to lower nutrition levels and medical care.
3) "...Changes to Social Security made work more attractive relative to retirement. The liberalization and, for some, the elimination of the earnings test removed what many saw as an impediment to continued work...."
Say WHAT? ATTRACTIVE????? The word is NECESSARY!
People in high income brackets and privileged places - such as this author - who continually try to shovel these out and out lies as PAP to soothe the masses are beyond the epitome of evil....imho....
......Stupid @#$%@^#$%@^#$@#$@^#@$&# article !!! (there is no words to describe this)
I swear, I should get all the elderly in America on that scumbag writer! I really feel for the elderly, dang MSN you have no heart or brains at all!
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.