More older Americans are staying in the workforce past traditional retirement age—and they tend to be highly educated, pushing up incomes for older workers.
The percentage of retirement-age Americans who are still working has doubled since hitting its all-time low of 10% in 1985, according to a white paper from Washington D.C.-based money management firm United Income that references recently released data from the Census Bureau and the Bureau of Labor Statistics.
The BLS expects this upward trend to continue, estimating that 13 million Americans aged 65 or older will be in the labor force by 2024. (No surprise here, as a recent survey found nearly half of Baby Boomers have nothing saved for retirement).
College-educated adults are the fastest growing workforce segment among retirement-age adults, the white paper says, resulting in the higher income levels for older workers. The share of adults that are 65 years or older and working that have at least a college degree increased from 25% in 1985 to 53% in 2019.
This pushed up the average real income of retirement-age workers by 63% during this time period, from $48,000 to $78,000.
But according to Elizabeth Kelly, SVP of operations for United Income, there’s a mismatch between older Americans who need the income the most and the ones who are able to work and working. In an April 22 article on Bloomberg, Kelly said the more educated, wealthier individuals in better health are continuing to work, “but it’s probably their less-educated, working-class counterparts who need to work the most.”
Improved health is indeed cited as a key driver of the increase in labor force participation. Of Americans aged 65 or older and working or looking for work, 78% report being in good health or better, up from 73% in 1997 and 69% in 1985. As a result, more retirement-age people can work: 77% feel no limitations in the kind of work they can do, compared with 71% percent in 1997.
The white paper notes older Americans are more likely to work in white-collar professions and retail, while younger Americans are more likely to work in physically demanding fields like manufacturing.
Older Americans in the labor force earn more than their younger counterparts, and the gap has widened over time. On average, retirement-age Americans who are still working earn $78,000 in personal income, around 63% above where they stood in 1985, after adjusting for inflation. In comparison, working Americans below 65 earn on average $55,000, or 38% more than in 1985.
While the white paper doesn’t delve into reasons why more (highly educated) Americans are opting to stay in the workforce longer, it no stretch to think they’re worried they haven’t saved enough to retire comfortably. Working past 65 can keep them in the accumulation phase, hopefully building their 401k balances instead of starting to deplete them.
The Bloomberg piece says the typical worker in the bottom half of the income distribution, earning less than $40,000 a year, has no retirement savings. Those in the middle 40% of income distribution, earning from $40,000 to $115,000, have a median amount of $60,000 saved, and workers in the top 10% of income distribution making more than $115,000, are “woefully under-saved” with median savings of $200,000 (not including real estate and other tangible assets or a potential inheritance).
SEE ALSO:
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- Why Content Marketing is Key to Advisor Retirement Plan Success
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
