They say demographics is destiny.
Well, if that’s so, the U.S. Census Bureau’s report, The Older Population in the United States: 2012 , has lots to say about our collective future.
But instead of asking you to pour through the Census Bureau’s spreadsheet, we asked experts to review and report back on the most interesting takeaways from the 22 tables and hundreds upon hundreds of numbers in this look at Americans age 55 and older. Here’s what they had to say.
Plan to work longer, but don’t count on it
The Census Bureau report, according to the experts, suggests that older men are staying in the workforce, but working longer won’t be a reality for all — including those who want to keep working past age 65.
Larry Cohen, a director at Strategic Business Insights, a Princeton, N.J.-based consumer research and consulting company, noted that after 65, men are more likely to be in the workforce than women, 24.3% vs. 14.3%.
“If the trend of staying in the workforce past 65 continues, this is likely to benefit women more as life expectancy is not increasing so fast that these men are likely to be living that much longer, just working more,” said Cohen. Oh, and in these ages as in others, men typically make more than women.
Victor Marshall, a professor emeritus at the University of North Carolina at Chapel Hill, speculated that older Americans are working longer for reasons having to do with Social Security.
“In the U.S., a reason for more people working past age 65 is due to the legislation moving Social Security upward,” said Marshall. “It really does pay off financially for those who don’t die prematurely to stay in the labor force long enough to maximize the public pension.”
Others, however, have a different perspective: Matthew Drinkwater, the associate managing director of the LIMRA Secure Retirement Institute, noted for instance, that only 18% of all individuals age 65 or older are employed. What’s more, among those age 60 to 64, only around half are employed.
By contrast, Anna Rappaport, president of a Chicago-based consulting firm bearing her name and chair of the Society of Actuaries Committee on Post-Retirement Needs and Risks, said 78% of men and 67% of women at ages 55 to 59 are in the civilian labor force.
These statistics, say Rappaport and Drinkwater, suggests that plans to work in retirement don’t always become a reality. And the better plan would be to plan for the worst case — not working — and hope for the best case — working.
“Our research has demonstrated that pre-retirees are far more likely to anticipate working in retirement than is actually the case among today’s retirees, and plan to retire at much later ages than actual retirees do,” said Drinkwater. “While there is merit in planning to work longer because it allows for more years of savings and fewer years over which those savings must be deployed, many people won’t have that option. People’s retirement security cannot depend on job earnings, underscoring the need for saving as much as possible.”
Rappaport shares that point of view. “Employment at older ages is a key strategy for having a better retirement for people who are resource limited,” she said. “The labor force participation rates are up for from recent years, for both men and women, but remain lower than early rates for men only.”
Plus, she noted that many people continue to retire early. For instance, the SOA 2013 Retirement Risk Survey shows that people nearing retirement age have a median expected age of retirement of 65, whereas people already retired have a median age of retirement of 58.
And recent focus groups conducted for the SOA with voluntary retirees who were resource-limited indicated that a great deal of retirement was “pushed,” she said, citing this report — The Decision to Retire and Post-Retirement Financial Strategies: A Report on Eight Focus Groups .
According to Rappaport, the reasons for the “push” included employer cultures and environment, jobs that were too demanding, health issues, family needs and other. “Employer and public policies and practices could facilitate longer retirement and enable more people to work longer,” she said. “This is an area that needs attention. While this is not a new area — it badly needs attention and the issues that need addressing are not yet addressed well.”
And for the record, she said retirement ages have not kept up with increasing longevity. Read Rappaport’s article on this subject, The Golden Glitch: Expanding Longevity and Shrinking Work Lives , in the November/December issues of Contingencies Magazine. It points out, she said, that as a society, we are living longer. But our expectations about work and retirement haven’t kept up.
Your income will be lower in retirement
This might not come as a shock to anyone, but the Census Bureau report shows income levels for those in retirement tend to be much lower than the overall median household income in the U.S. according to Drinkwater.
For instance, median household income was $51,371 in 2012, but only one-third of all age 65-plus households have incomes of $50,000 or more. And among nonfamily households, where no one else living in the household is related to the householder (usually single, divorced/separated, or widowed individuals), the percentage drops to 14%, Drinkwater noted.
Viewed another way: Median household income is around $34,000 for those age 65 and older, while the corresponding figure for those age 55 to 64 is around $59,000, according to Census Bureau’s Income, Poverty, and Health Insurance Coverage in the United States: 2012 .
“While most people understand that their incomes will be lower in retirement, will today’s pre-retirees accept the notion of a 40% drop in their incomes?” asked Drinkwater. “Will they be able to adjust their living standards to this new reality, or will they somehow be able to generate enough income from their assets or employment to enjoy higher ‘replacement ratios’ than was the case for their predecessors?”
Poverty a problem for women
Not only will income be lower for many after age 65, the prospect of living in poverty looms large for some, and especially for women.
In general, however, the 55-plus population living in poverty is relatively low at 9.7%. But Linda Nazareth, author of “Economorphics: The Trends Changing Today into Tomorrow,” said there’s a big difference between age groups.
For instance, the lowest percent is for the group aged 65 to 74, where it is 7.4%. “These are the early boomers/pre-boomers who had related uninterrupted work lives, and who are the most likely group to be getting old-fashion, reliable pensions,” said Nazareth, who is also an economist with Relentless Economics. “The group aged 55 to 59 has 10.7% in poverty and the group 60 to 64 has 10.8%. “Older retirees also have higher rates of poverty, but that one ‘lucky cohort’ had the best chance of escaping it,” she said.
Women, on the other hand, continue to have higher poverty rates than men, according to Rappaport. At ages 85 and over 14% of women are in poverty vs. 7% of men. This compares to 9% for women and 6% for men at ages 65 to 69.
And this data, Rappaport said, reinforces the need for better planning. For the record, and not shown in the census data, is this factoid: Couples are much better off than singles, Rappaport said.
Divorce poses a financial problem
To be fair, divorce and widowhood are two reasons why women have higher poverty rates than men. Consider: 13.8% of the population aged 55-plus is divorced, though it varies wildly by age. For instance, Nazareth noted that just 4.2% of those 85 and over are divorced, but 17.1% of those 55 to 59 are divorced.
“That’s a big deal in terms of how assets are being split up, and it puts the ‘about-to-retire’ group in a precarious state as regards their financial health postretirement,” Nazareth said. “I sometimes say ‘would you rather live in poverty or live with your spouse? Because it might come down to that.”
Planning for widowhood a necessity
Rappaport also noted huge differences when it comes to the marital status by age and sex of older Americans.
For instance, 73% of women age 85 and older are widows. “And with increasing life spans, some of them will live a lot longer,” Rappaport said. “There is a huge need for better planning here.”
The 2013 SOA Retirement Risk Study points out many gaps in planning for widowhood and the SOA’s Retirement Risk Research also points out that many people are unaware of the financial consequences of widowhood.
“Many widows will be worse off financially than before widowhood, but the majority of respondents did not realize this,” Rappaport said. “Among the survey respondents, the majority expect there to be no change in financial status, and the percentage expecting to be better off is about the same as the percentage expecting to be worse off.”
For his part, Drinkwater said it’s worth noting that more than a third (36%) of all women over 65 are widows. Men, he said, are much less likely to be widowed (12%) because they tend to die before their wives and they remarry more often than women when their spouse dies.
Plus, women are more likely to be living alone — 71% of non-married households are headed by women, usually with no family living in the household. Like Rappaport, Drinkwater said these statistics suggest that retirement plans must include provisions for widowhood, which has important implications for caregiving arrangements, managing finances, and other needs. “But it’s not a comfortable subject to discuss and some couples are likely in denial or don’t want to consider the implications for the surviving spouse after one of them dies,” he said. “Our research, as well as that of other organizations such as the SOA, consistently shows that in terms of retirement security, women are less confident, less well-prepared, and less financially well-off than men, putting them at special risk.”
But boomer women are set to dominate
Despite the fact that a greater percentage of women are living in poverty than men, the future looks somewhat bright for women in general, according to Cohen.
Under age 55, the number of men and women are roughly equal, Cohen said. But starting at 55, increasingly there are more women than men. And when you get to 85, there are more than 1.5 times women than men.
Factor into this that the boomers are such a large portion of the population and one of the cohorts that will dominate in the next several decades are boomer women, said Cohen. “And if you think these women are passive, obedient, quiet, go-along-with-the-flow, just like those from prior cohorts, you don’t know my wife,” he joked.
Cohen also said educated women stand to benefit from future trends.
At the moment, only one in four (24.1%) of women over the age of 55 has a college degree or more education. But among the boomer women it is closer to 30%, according to Cohen. “So these boomer women that will be living longer and inheriting their husband’s money (not to mention their parent’s) will be more educated than women who are from prior generations,” said Cohen.
Going back to college
Nazareth also believes that older Americans who are college educated will be more inclined to return to school in their older years. “If you look at the population aged over 55, 16.1% has a bachelor’s degree, but there is a wide variation. In the 55 to 59 group, 18.8% do, while for the group 75 to 84 it is 12.7% and for those 85-plus it is 10%. “If you have been to college earlier in your life, you are going to be more comfortable about furthering your education when you retire,” Nazareth said. “So the boomers are going to be headed to college, in some form or another, in droves.”
It may, however, take a bit for them to get there. “Right now they are working if they can to build their assets, but eventually they will be forced out of the workforce,” she said.
Planning is a must
Another expert, meanwhile, noted that Americans over age 55 have made great progress over the past decade when it comes to educational, income, employment levels of individuals age 55.
But, Lynette DeWitt, a research manager at the Deloitte Center for Financial Services, warned that future generations may not age as gracefully as today. “Only three in 10 consumers feel very secure about their retirement,” she said, citing Deloitte’s survey on the subject, “Meeting the Retirement Challenge.”
“The main reasons for retirement insecurity include a failure to save enough, and a lack of disposable income,” she said. “With educational and housing expenses rising, consumers may continue to find it challenging to balance spending and savings goals. So it is important for individuals to have a financial plan in place to help balance their retirement needs with other conflicting priorities.”
Robert Powell is editor of Retirement Weekly, published by MarketWatch. Follow his tweets at RJPIII . Got questions about retirement? Get answers. Send Bob an email here .