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Say goodbye to early retirement

By Jennie L. Phipps · Bankrate.com
Monday, June 30, 2014
Posted: 6 pm ET

A new government study shows that a decades-long trend toward retirement at a young age has reversed, probably because we can no longer afford it.

retirement-blog-us-census-bureau-delaying-retirementIn 1950 -- 45.8 percent of men 65 and older were working, according to a report on 65+ in the United States: 2010, released June 30 by the U.S. Census Bureau. Through the decades of the 1960s, '70s and '80s, generous pension plans made it ever likelier that men would hang up their work boots at earlier ages. By 1993, only 15.6 percent of men were working past age 65. (The number of women 65 and older who remained in the workforce has always been small, rising from 9.7 percent in 1950 to 10.6 percent in 2003.)

Then came a perfect storm of factors in the last decade that has encouraged more older men -- and women -- to stay on the job, with workforce participation in 2010 rising to 22.1 percent among men older than 64 and 13.8 percent among women of the same age. "The rise in labor force participation is interesting as both a potentially long-running trend, and because we saw that during the recession that it was the older workers whose employment share actually rose. They were the only age group to have their employment share rise," says Loraine West, chief of the Eurasia branch of the population division of the Census Bureau and an author of the report.

Here are some of the issues -- benign and otherwise -- that the study suggests are pushing people to work longer.

  • People are living longer and their health is better at older ages.
  • More people work with their brains rather than brawn.
  • The age when people are able to collect an undiscounted amount of Social Security has climbed from age 65 to 67 for those born in 1960 and later.
  • There's no Social Security earnings test penalty beginning at age 66. In 2000 the federal government eliminated a provision that limited the amount of wages workers could get paid and still collect their full monthly Social Security benefit for those who had reached full retirement age. According to the report, some studies found that this change resulted in a 3.5 percent increase in the employment of people older than 64 and a 2 percent increase in the employment of people age 66 to 69.
  • The demise of old-fashioned, defined benefit pensions. The number of people expecting defined-benefit pensions, which puts the retirement planning burden on employers instead of workers, has declined from 62 percent in 2005 to 52 percent in 2010. Still fewer future retirees are expecting this kind of secure pension. Only one-third of employees in 2011 said that they or their spouses were participating in a defined benefit pension at their current jobs.
  • Savings have declined. Nearly two-thirds of people ages 50 to 64 reported that they lost money in mutual funds, individual stocks or 401(k)-type retirement accounts during the recession. Among those older than 64, 5 percent lost more than 40 percent of their investments.
  • Job loss prior to retirement. In 2010, the unemployment rate for people age 55 to 64 averaged 7.1 percent. That was more than double the average rate in 2007 of 3.1 percent.

Social Security is the No. 1 source of income for everyone older than 64, with 86.3 percent receiving it. About 52 percent also have income from savings and nearly 40 percent get some pension or other kind of income from their former employers. More than 26 percent also rely on income from work.

Expect that percentage to rise. "We haven't seen projections for the future, but researchers had already identified a rising trend in later retirements prior to the recession," West says.

Will you ever retire?

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22 Comments
Phil
July 07, 2014 at 8:43 pm

Elimination of tax on dividends will help an average American to save more. Taxing on dividend earning is some kind of double taxation (corporate and individual income tax).

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