Need to save more for retirement among the key factors, Bureau of Labor Statistics says.
More retirement-age Americans and those within a few years of their retirement are working and are projected to become the fastest growing age group among the U.S. labor force, according to the Bureau of Labor Statistics (BLS).
About 40% of people ages 55 and older were working or actively looking for work based on data collected in 2014. That number, known as the labor force participation rate, is expected to increase fastest for the older segments of the population–most notably, people ages 65 to 74 and 75 and older–through 2024. Participation rates for most other age groups in the labor force, however, aren’t projected to change much over the 2014-2024 decade, the BLS said in its Career Outlook1, published in May.
It’s clear that the aging baby-boomer generation–those born between 1946 and 1964–is fueling the projected labor-force growth rates, even as more baby boomers qualify for Social Security benefits, pensions and other retirement income plans that they’ve contributed to during their full employment years. Longer life expectancies compared with previous generations and higher education levels–which increase their likelihood of staying in the labor force–are among the reasons people are working later in life, the report said.
Another clear incentive to keep working is the need to save more for retirement, the BLS said.
Although it depends on what factors or measures you consider, some trends do point to lower retirement savings and lower participation rates in defined benefit plans sponsored by employers and defined contribution plans such as 401(k)s.
Participation in any type of plan, for example, fell from 60% in 2001 to 53% in 2013 for families headed by working-age workers between age 32 to 61, according to data compiled by the Economic Policy Institute (EPI). The nonpartisan think tank noted that it would have expected participation to increase during the new millennium as the larger baby boomer age group entered their 50s and 60s.
The recession from late 2007 through mid-2009 also negatively impacted U.S. families’ retirement savings. Financial markets across the globe plummeted during the financial crisis–the S&P 500 Index’s annual total return, for example, fell year-on-year by 37% in 2008. Poor returns meant that retirement plan savings took a big hit, particularly for older workers.
That is evident in the figures compiled by the EPI. Average retirement savings of families headed by workers between age 32 to 61 either stagnated or declined after peaking in 2007. For the broad 32 to 61 age group, average retirement account savings in 401(k)s, IRAs and Keogh plans fell by 5.7% from a high of $101,548 in 2007 to $95,776 through 2013, the EPI data show.
The trend is starker for older working-age families. Retirement account savings for families headed up by a worker between the ages of 56 to 61 fell by 22.8% to $163,577 in 2013 down from $211,885 in 2007, according to the EPI figures. Older savers, the EPI says, are more affected by market downturns because investment returns outweigh new contributions.
For its part, the BLS says incentives like changes to Social Security benefits and employee retirement plans are contributing to the growth of the country’s older labor force. Workers age 55 and older made up the smallest segment of the labor force from 1970 until the end of the 20th century. These older workers’ share of the labor force began to increase in the 1990s, while younger age working groups began to comprise a declining share of the labor force. By 2003, the older age group no long had the smallest share, according to the BLS report.
For the 2014 to 2024 decade the labor growth rate of the 65-to-74-year-old age group is expected to be 55%, and as high as 86% for the 75-and-older age group. That compares with a 5% increase for the labor force as a whole.
1 – Mitra Toossi and Elka Torpey, “Older workers: Labor force trends and career options,” Career Outlook, U.S. Bureau of Labor Statistics, May 2017.
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