Keeping Seniors Connected to the Labor Market Benefits to working longer Work patterns and trends at older ages Work impediments at older ages

The U.S. Population is Aging Rapidly

Population Aging Could Pose Problems for Economy and Government Finances If current employment patterns persist, the share of adults that is employed will fall over time Would slow growth in national output, government revenues Strain government’s ability to cover rising cost of retirement programs, other public services Could result in worker shortages or skill gaps

Working Longer Would Address These Economy Wide Concerns as Well as Increase Individuals’ Retirement Income Security

Increased Employment at Older Ages Would Increase the Number of Workers per Retiree Source: Johnson and Steuerle (2004)

People Can Raise Retirement Incomes by Working Longer Accumulate more Savings Accumulate more Social Security Build more wealth in employer pensions Extend retirement savings –reduce years over which Social Security, pensions, other wealth are spread

Annual Income at Age 75, Net of Federal Income Taxes and Health Insurance Premiums, by Retirement Age Source: Butrica, Johnson, Smith, and Steuerle (2004). Notes: Amounts are in constant 2004 dollars. Estimates refer to an unmarried man who turned 55 in 2005, spent some time in college, worked continuously after age 22 earning average wages, participated in a DC plan since age 35, and does not otherwise save. He purchases a single-life annuity at retirement and a Medigap policy. Tax estimates assume the federal tax cuts enacted in 2001 and 2003 expire in 2010.

Keeping Seniors Connected to the Labor Market Benefits to working longer Work patterns and trends at older ages Work impediments at older ages

Older Men’s Participation Rates Fell Steadily from 1969 to the late 1980s, Have Been Climbing in Recent Years

Older Women’s Participation Rates Have Increased Sharply Since the Late 1980s

Labor Force Participation Rates for Older Men Increase With Education

Female Participation Rates Also Increased with Education, Especially At Ages 55-64

Employment Rates for Older Men Decline Sharply With Health Problems

The Relationship Between Health Status and Employment Is Even Stronger among Women than Men

Part-Time Employment Increases Rapidly with Age among Older Workers

Part-Year Employment Rises With Age After Age 61

Self-Employment Increases With Age, Especially Among Men

“Traditional” Retirements Are Now Quite Rare Retirement is increasingly a gradual process –not an abrupt transition About two-thirds of older people work after retiring from career jobs About one-third of older adults “unretire” –return to work after leaving the labor force

What Do Older Americans Want From Work in Retirement? According to an AARP Survey they want: Flexible schedules and/or reduced hours Less stress Mental engagement Social engagement Pension and health benefits

Reasons to Think Trend Towards Increased Work at Older Ages Will Continue Baby Boomers report they are more likely to work at older ages than earlier generations Health is improving and educational attainment is likely to increase at older ages Trend away from traditional defined benefit pensions to defined contribution pensions is likely to continue Trend away from employer provided retiree health insurance is likely to continue Social Security retirement age is scheduled to increase from 66 to 67.

Keeping Seniors Connected to the Labor Market Benefits to working longer Work patterns and trends at older ages Work impediments at older ages

Important to Consider Work Impediments at Older Ages Some workers can’t work longer for health reasons Evidence suggests older workers have more difficulty getting re-employed Traditional pensions often penalize workers who remain on the job after they can receive benefits Social Security discourages work at older ages by providing few rewards for workers who have spent 35+ yrs at work Higher health costs make older workers more expensive

Conclusion Working longer would benefit the economy and individuals’ retirement security Labor Force Participation has recently been increasing at older ages Still there are some impediments to working longer