It is projected that by 2024 the working class of people aged 55+ will be the largest among all age groups at 24.8%. Compare that to 1994’s statistics where they were the smallest among all age groups at 11.9%.
A couple reasons for this trend: first, the baby boomers population is aging so those born between 1946-1964 are now in the older age group. By 2024, the youngest will be 59 years old. Secondly, the increase of labor force participation rates among older workers. One study shows that about 60% of older workers that have a “career job” retire and more to a “bridge job” (short-term and/or part-time). Another study shows that about half of retirees are not fully leaving the labor force permanently.
So why are older workers choosing to continue working?
Longer and more healthful lives
- Older workers wish to remain healthy and active. People have longer life expectancies and they need the income to live to higher ages.
- In 2014, Americans at age 65 could expect to live an additional 19.3 years according to the Centers for Disease Control and Prevention, or until about age 84. That’s up almost 3 years since 1980.
Changes to retirement plans
- There are few private industry employers that offer defined benefit (traditional) retirement plans to employees, and those that do offer defined benefit plans have been declining. More private industries have been offering defined contribution plans.
- Defined contribution plans are funded by the employee and how much they choose to invest. So there is more uncertainty with defined contribution plans versus traditionally defined plans, which consist of lifetime periodic payments to the retiree or their spouse.
Increase in Social Security retirement age
- The age to receive full Social Security benefits was raised in 1983, grows higher according to the year of birth, and is currently 67 years of age for those born in 1960 or after. Benefits are even higher if one waits until 70 to retire. So if one retires earlier, then they receive a reduced benefit rather than if they wait until age 67 and receive full benefits.
- The Social Security earnings test was eliminated in 2000 for workers who have reached their full retirement age. This means that if a worker is at their full retirement age, their Social Security benefits are not reduced if they earn wages.
To keep employer-based health coverage
- The percentage of businesses offering health care coverage in retirement has decreased. A Kaiser Family Foundation study found that the percentage of large firms (200+ employees) offering retiree health benefits to active workers was 24% in 2016, compared to 66% in 1998.
- Workers are not eligible for Medicare until age 65, so they may choose to continue to work to have health coverage from their employer.
Distribution of the labor force between 1994 and projected 2024.
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Source: U.S. Department of Labor Blog | Why More People Ages 55+ are Working