The U.S. Bureau of Labor Statistics recently published their data on employment statistics for those 65 and older. This latest set of data continue the trend of an increased number of Americans working past age 65. In fact, nearly one in five Americans are now working past age 65, up from only one in ten back in the mid-80’s. Why are Americans working longer and is this a problem?
As you can see in the chart above, Americans used to work past 65 at a similar percentage during the 60’s but that rate took a significant tumble for nearly 20 years. What happened? In 1966 the United States introduced Medicare and it was no longer necessary to stay employed to get health care.
However, you can also see that trend reversed beginning in the early 2000’s and so far has continued to increase at a steady pace for nearly two decades. A recent survey done by Transamerica indicated that nearly half of those working past 65 are having to do so because of financial problems. As I see it, there are two major reasons for this major increase.
The first is the death of the defined pension. It has become increasingly rare outside of government jobs to have a pension. The burden has shifted to the individual to save and prepare for retirement and unfortunately, most are unprepared for that responsibility. For some, it can be intimidating to set up a 401(k) and many often don’t contribute until later in life leaving them far behind where they need to be.
The second reason is that starting in 2000, the stock markets have been incredibly volatile. Not only was the responsibility of investing thrust onto the average citizen for the first time, it also turned out to be one of the most volatile decades in history. For many, their investments were mismanaged and could never be recovered, forcing them to work much longer than they had originally hoped.
Does this mean that all is lost? Not at all, but it does mean that the earlier you start preparing for retirement, the easier it will be to prevent becoming a retirement statistic like the above. While pensions are gone, 401(k)’s can still provide a solid retirement if used appropriately. Figuring out how much you need to save as early as possible is the easiest and best way to make sure you are prepared to walk away from the paycheck one day. And while the market volatility has been intimidating, the prudent investor has actually done very well over time. The stock market reached new highs after the financial crisis and those who were invested appropriately were able to weather the storm.
If you ever need any help figuring out how much you should be saving or how to properly diversify your portfolio to weather market downturns, never hesitate to reach out to one of our advisors to make sure your retirement is being safeguarded.
"Retiree Research: The Current State of Retirement." Transamerica Center for Retirement Studies, December 2, 2015, http://www.transamericacenter.org/retirement-research/retiree-survey.