Despite fears of a pending spike in Baby Boomer retirements, Americans age 55 and older appear to be staying in the labor force longer as they face higher health costs and losses to their retirement nest eggs, according to a study by the nonpartisan Employee Benefit Research Institute (EBRI). In addition, many just want to keep busy.
For those ages 55-64 (the “near elderly”), the increase is being driven almost exclusively by women remaining in the work force; the male participation rate is flat to declining. However, among those age 65 and older (the elderly), labor-force participation is increasing for men and women, finds the study, "Labor Force Participation Rates: The Population Age 55 and Older" in the February 2010 issue of EBRI Notes.
As the study suggests, workers increasingly are facing more responsibility in paying for their retirement expenses. Private-sector workers who have access to an employment-based retirement plan most commonly have a defined contribution plan—typically a 401(k) financed at least partially with workers’ contributions—and retiree health insurance is becoming increasingly scarce. Even for those who do have retiree health insurance (either full insurance for retirees under age 65 or a Medicare supplement policy for those who are Medicare-eligible), caps on what the employer will pay annually for the coverage are being reached or surpassed.
Consequently, the study says, workers have greater incentives to stay in the workforce, such as the ability (and in some cases the need) to continue to accumulate assets in retirement plans and to have access to employment-based health insurance coverage, instead of having to tap into their savings to pay for their expenses.
The study, based on U.S. Census Bureau data, includes these additional points:
• The percentage of civilian Americans age 55 or older in the labor force has steadily increased since 1993, reaching 39.4 percent in 2008. Previously, the percentage of those 55 or older in the workforce had declined from 34.6 percent in 1975 to 29.4 percent in 1993.
• Education is a strong factor in an individual’s participation in the labor force at older ages. Those with high levels of education are significantly more likely to remain in the labor force longer than those with low levels of education.
• The upward trend among the working near elderly and elderly is likely to continue because of workers’ need for access to employment-based health insurance and for more earning years to accumulate assets in defined contribution plans—especially after the 2008 downturn in the stock market and economy.
More than Money
While older Americans have a greater need to work to help make their retirement assets last longer or to continue to build up assets, monetary incentives are not the only motivating factor. Many Americans have expressed an increased desire to work longer, particularly among those with more education, for whom more meaningful jobs might be available that can be done well into older ages, EBRI found.
Still, economic fears are a major reason why older workers are staying on the job. "The economy continues to cast doubt in the minds of mature workers regarding executing on their future retirement plans," says Jason Ferrara, senior career adviser at CareerBuilder, a hiring and human capital solutions firm. "Twenty-seven percent of hiring managers say they were approached about postponing retirement last year and were open to retaining maturing workers," he noted, citing a November 2009 CareerBuilder survey.
Stephen Miller is an online editor/manager for SHRM.
Related Article:
Retiring Boomers Prompt Increase in Phased Retirement, SHRM Online Benefits Discipline, August 2008
SHRM Urges Flexibility for Phased Retirement Benefits, SHRM Online About SHRM, April 2007
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