Why more seniors are working longer

Improved health, changing job characteristics and Social Security rules are responsible for the graying workforce

Over the past two decades, the share of older workers increased by about one-third as more women continued to join the workforce and fewer men retired early, according to a new Congressional Budget Office report that examines why more seniors are working longer. The report offers some interesting insights into the trend.

After declining for decades, the share of people in the United States from ages 55 to 79 who were employed began to increase in the mid-1990s. In 1995, 33% of people in that age range worked. By 2018, 44% did.

The changes in the level of employment of people from ages 55 to 79 — the period during which many people stop working — were related to changes in their demographic characteristics, such as improved health and increased education; a shift away from labor-intensive blue-collar jobs; and changes in Social Security rules, the CBO report found.

During that same period, the prevalence of both defined-benefit retirement plans and health insurance for retirees decreased. Those changes also are associated with workers’ staying on the job longer as a way to boost their savings and delay retirement until they qualify for Medicare at 65.

In fact, a new study from the Center for Retirement Research at Boston College found that the only way to make dramatic progress in reducing the percentage of working-age households that are at risk of falling short in retirement is to boost 401(k) contributions by 5 percentage points and to work two years longer.

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Evolving Social Security policies over the years have also made working in one’s 60s more attractive, the CBO said.

Between 1990 and 2018, the age at which people become eligible for full retirement benefits increased, thereby increasing people’s incentive to delay claiming their benefits and stay employed longer. The full retirement age has gradually risen from 65 (for those born before 1938) to 66 (for those born from 1943 through 1954) and eventually will increase to 67 (for those born in 1960 and later).

In addition, the parameters of the retirement earnings test have been relaxed over the years. The earnings test determines to what extent benefits are temporarily withheld for Social Security claimants of certain ages whose earnings are above certain thresholds.

In the early 1980s, the oldest age at which wages were subject to earnings restrictions fell from 71 to 69. In 2000, that age was further reduced to full retirement age, which was 65 at the time and later rose to 66.

In 2019, someone who is under full retirement age for the entire year and who continues to work can earn up to $17,640 without losing any Social Security benefits. Earnings above that limit temporarily reduce their Social Security benefits by $1 for every $2 over the limit.

In the year they reach their full retirement, there is a more generous limit. In the months preceding their 66th birthday, they can earn up to $46,920 and would forfeit just $1 in benefits for every $3 earned over the limit in 2019. The earnings restrictions disappear at full retirement age and any forfeited benefits would be restored in the form of higher monthly benefits in the future.

Lowering the oldest age at which earnings are subject to the test allowed more people to claim their full Social Security benefits while they continued working.

For example, people in their 60s with annual earnings of $50,000 and annual Social Security benefits of $20,000 who were born in 1910 would have had most of their benefits temporarily withheld if they claimed them between age 62 and 70 because of the lower earnings cap and higher age limit in effect at the time. People with the same characteristics who were born in 1950 could collect their full retirement benefit at age 66 and were no longer subject to the earnings test.

A separate survey conducted for Provision Living Senior Living Communities in St. Louis also looked at why people are working longer. The survey, conducted in August, asked more than 1,000 people between the ages of 65 and 85 why they continue to work either full- or part-time. The average age of those surveyed was 67 and respondents were 60% male and 40% female.

More than 60% of the respondents in the Provision Living survey said they continue to work for financial reasons, including not being able to afford retirement (37%), supporting a family (23%), paying off debt (19%) or a mortgage (13%), or saving for a big expense (4%).

The remaining respondents, representing 32% of those surveyed, said they continue to work for personal reasons such as enjoying working (45%), preventing boredom (18%), shifting to part-time employment (6%) or avoiding loneliness (6%).

The average retirement savings of the seniors in the Provision Living survey who are still working is about $133,000. Average savings are higher among college-educated respondents ($169,000) and lower for seniors without a college education ($80,000).

Most of the working seniors said Social Security will be their primary source of income after retirement (70%), followed by pension and 401(k) income (37% each), personal savings (27%), stocks (20%) and support from family (11%).

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