Why are older Americans working longer?

While the average age of retirement has risen only slightly over the past three decades, a growing number of older Americans are working longer due to insufficient savings and dwindling access to traditional pension plans.

The U.S. Census Bureau found that the share of Americans working past age 65 grew from 10 percent in 1984 to 19.7 percent in 2014, according to a report at http://1.usa.gov/1OSTip8.

Several factors are causing growth in the number of older workers, according to the census report:

* Increases in the cost of health insurance and decreases in employer-sponsored retirement benefits.

* Increase in life expectancy rates.

* Lower rates of coverage by traditional pensions.

* A desire to increase Social Security benefits and/or accumulate more savings.

* The potential for improving emotional and physical health by remaining active.

Older Americans also experienced a significant reduction in retirement resources because of the Great Recession, according to a study by the National Poverty Center. This group was faced with three choices: work longer, save more or live on less in retirement, the report found.

For those born between 1943 and 1954, 66 is the age at which full Social Security benefits can be claimed. For those born in 1955 and later, the age for full benefits gradually rises from 66 to 67 for those born in 1960 or after, according to www.ssa.gov.

Delaying retirement to boost Social Security benefits is especially important for people in lower socioeconomic households, explained Matthew Rutledge, a research economist at the Center for Retirement Research at Boston College.

"In particular, this group depends more on Social Security, so the later full retirement age probably gives them more incentive to delay retirement than someone who is less dependent on Social Security," Rutledge said in an e-mail.

Some of the increase in the average retirement age also stems from a greater number of women in the workplace than in previous generations, concurred Rutledge and Diane Oakley, executive director of the National Institute on Retirement.

In 1976, 42 percent of women ages 55 to 64 were in the workplace; that rate is more than 59 percent today, Oakley said.

"In some respects, some of the older (workers) are people who weren’t working before, especially when it comes to women in the workplace," she noted.

Generally, however, most people are working longer because they don’t have adequate income from Social Security benefits and retirement investments and need to earn and save more, Oakley said.

Her institute’s research shows this is especially true for Latinos and Asians older than age 65, for whom work is the biggest source of income.

"If you look at retirement sources of income, Latina women are working because they have to pay for basic expenses," she said.

The need to work longer also derives from insufficient retirement savings and lack of access to retirement coverage through an employer, she said.

Latinos and African-Americans ages 45 to 54 on average have about $29,000 in retirement savings, compared to $129,000 for white Americans, Oakley said. And 75 percent of Latinos and African-Americans ages 25 to 64 have less than $10,000 saved for retirement; only about half of white Americans have so little set aside for retirement.

"That’s a huge difference," she said. "We have a retirement crisis (across all groups)."

The institute’s research does show that the future may bode better for younger Latinos who generally may be more educated and have better job opportunities and access to retirement plans, Oakley said. But differences persist among native-born and immigrant groups within the Latino population, she explained.

Younger people across all racial and ethnic lines may actually benefit from the trend of older people remaining in the workforce, Rutledge noted. Older people who work may have more disposable income to spend, which strengthens the economy and may lead to more job openings for young workers, he said.

A study by the Center for Retirement Research explored whether older workers squeeze out younger workers from the workforce, finding that the unemployment rate for younger workers is not higher in places or during periods where the employment rate for older workers also is high, Rutledge explained. 

"Basically, then, older workers extending their careers doesn’t seem to be bad for young people, and it might even be good for them," he added.

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