By Teri Morisi
It’s a fact: our workforce is aging. By 2024, nearly 1 in 4 people in the labor force are projected to be age 55 or over.
This is a big change from 1994, when people ages 55 and older represented only 11.9 percent of the labor force – a share smaller than those held by other age groups: 16-24, 25-34, 35-44 and 45-54. But by 2024, their projected share will be the largest among these age groups.
There are two reasons for this trend. The first is an aging population: baby boomers − those born from 1946 to 1964 − are moving into older age groups. By 2024, the youngest will be 59 years old.
The second reason is an increasing labor force participation rate among older workers. Research shows many older people are remaining in the labor force longer than those from previous generations. According to one study, about 60 percent of older workers with a “career job” retire and move to a “bridge job”; that is, a short-term and/or part-time position. Another study found that about half of retirees followed nontraditional paths of retirement in that they did not exit the labor force permanently.
The big question is why: Why are older workers choosing to remain in the labor force? Here’s what we know.
Longer and more healthful lives
Older workers wish to remain healthy and active. People have longer life expectancies, and they need enough 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 about 3 years since 1980.
Changes to retirement plans
Few private industry employers now offer defined benefit (traditional) retirement plans to employees, and the proportion of those offering defined benefit plans has been declining. In 2015, only 8 percent offered defined benefit plans to employees, compared with 47 percent of private industry establishments offering defined contribution plans, according to data from the Bureau of Labor Statistics’ National Compensation Survey.
Defined contribution plans typically include voluntary savings accounts, such as 401(k) plans, in which workers voluntarily make deductions from their pay into funds. Earnings from these funds are based on the amount that workers choose to invest and how the funds perform. There is more uncertainty with defined contribution plans versus traditional defined benefit 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…Click here to read the rest of the blog post.