Boomers Find Reasons to Retire Later

It is one of “the most significant labor market trends” in the United States, says Wellesley College researcher Courtney Coile.

She’s referring to big increases since the 1980s and 1990s in the share of older Americans in the labor force, including one in three men in their late 60s.

As for women, the baby boomers were really the first generation to thoroughly embrace full-time employment. Older women’s participation in the labor force hasn’t quite caught up with their male coworkers, but they’ve made impressive strides since the 1980s and have rapidly closed the retirement-age gap.

Given the implications of this trend for retirement security – the longer people work, the better off they’ll be – Coile and many other researchers have investigated what’s driving it. They agree on several things that are changing the retirement calculation.

College. College graduation rates have increased dramatically over the past few decades, and people who’ve spent at least some time in college tend to remain in their jobs longer. This trend has played a big role in the increase in baby boomers’ participation in the labor force, Coile said.

Social Security. Three major reforms to the program have boosted U.S. retirement ages. A 1983 reform is slowly increasing the age at which workers are eligible to receive their full benefits, from 65 for past generations to 67 for workers who were born after 1959. This amounts to a significant benefit cut at any given age that a retiree claims his benefits. Various studies show that this has created an incentive to delay signing up for Social Security in order to increase the size of the monthly benefit checks.

The 1983 legislation also played a role in pulling up the average retirement age by providing larger monthly benefit increases for people who delay Social Security beyond their full retirement age. In 2000, a third reform ended the temporary withholding of some benefits that had been in place for people in their late 60s who worked while simultaneously collecting Social Security.

Employer retirement plans. Two employer benefits that encourage people to retire at relatively young ages have largely gone by the wayside in the private sector. First, the pervasiveness of employer health insurance for retired workers, by reducing their medical costs, used to make it easier for people to afford retirement before Medicare kicks in. And traditional pensions often gave workers a strong incentive to retire by their early to mid-60s, if they reached the target age and years of service required to maximize their pension credits.

Pensions have largely been replaced by 401(k)-style retirement savings plans, which have the opposite effect. Studies show that people with 401(k)s retire about one and a half years later than similarly situated people with pensions. The reason: older workers don’t always have a clear idea about when they should retire, but they do know they can keep improving their future finances by saving more and reducing the length of time they’ll have to fund their retirement.

Wives’ influence. More women than ever are working, and couples often coordinate their retirement dates. Since husbands are three years older, on average, it is common for them to delay their own retirement until their wives retire.

Health and longevity. In recent decades, Americans have generally been getting healthier and living longer, and older people may consider this and set a later retirement date. Our parents’ longevity is another influence on our expectations of long we’ll live. One study found that if someone’s parent dies unexpectedly, the worker is more likely to retire earlier than he’d planned.

Economic changes. The shift away from manufacturing to a service-oriented economy means that more jobs aren’t as physically taxing, which makes it easier to work longer.

The research clearly shows that the average retirement age for baby boomers has increased as they have continually adapted to the multitude of changes that have occurred over their lifetimes.

The more difficult question for researchers to answer is when the forces that pushed up the retirement age will finally play themselves out.

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