Personal Finance More ­Americans waiting to retire

By Benton Alexander Smith

The Daily Record Newswire

BOISE, ID - Many Americans have decided to delay retirement. The elderly are working at the highest rates the country has seen in decades.

The Bureau of Labor Statistics estimates that about 32 percent of Americans age 65 to 74 will be active in the workforce by the year 2022. Only 20 percent of that age group remained in the workforce in 2002.

"The idea of a stable retirement that we have come to accept over the last 40 years is being threatened," said Kevin Cahill, project manager at the economic consulting firm ECONorthwest.

People are staying in the workforce longer because of longer lifespans and better health, but the biggest reasons are economic, Cahill said.

While the average retirement age crept down from age 65 to age 62 between 1975 and 1994, it has since climbed back up to 65. About 20 percent of workers don't retire until well after that, and 10 percent don't retire until after the age of 75, according to the U.S. Census Bureau.

Three factors traditionally have helped individuals retire: Social Security, pensions and personal savings. Social Security provides incentives for delayed retirement, and has raised retirement age several times, from age 65 for people born in the 1940s or earlier to age 67 for people born after 1960.

ECONorthwest predicts that Social Security benefits will continue to be cut as the baby boomers enter retirement.

"For the past 30 years (1980 to 2010), as the Baby Boomers aged and our population grew, we added three net revenue generators for every added net expender; over the next 30 years, we will add one net revenue generator only for each added net revenue expender," Cahill writes in an ECONorthwest report, "What Does the Aging of Idaho Mean for its Citizens, Employers and Policymakers."

"More simply, there will be relatively more people riding in the wagon than pulling it," he said.

Although some baby boomers have had to wait longer for Social Security payments than prior cohorts, most will receive full payments. This won't be the case for future generations without the appropriation of additional funding, according to the Social Security Administration. Social Security payments are expected to continue in full until 2037, when the program's trust fund is depleted. Taxes will only cover 75 percent of the program at that point.

Pensions have also experienced a lot of change during the baby boomer lifespan, Cahill said. Traditional defined-benefit pensions have largely given way for defined-contribution plans such as 401(k)s. This shift has lessened the benefit that employees receive from employers and exposed individuals to greater investment risks.

Meanwhile, personal savings are at their lowest level since the Great Depression, according to the U.S. Bureau of Economic Analysis. Savings reached their highest rate in the 1970s, when Americans were saving more than 14 percent of their income. Today, Americans only save about 5 percent of their income.

The result is that many Americans now reach age 65 with less than $100,000 in savings, an amount that will not be able to support them for the next 16 years, Cahill said.

"Many of these older Americans will have to choose between continuing work later in life or significantly lowering their standard of living," Cahill said.

About 60 percent of the baby boomers who have reached retirement age have worked a second job after retirement, according to ECONorthwest.

Fred Emery, a 71-year-old former mortgage banker of 27 years who now greets customers at Ashley Furniture in Meridian, said he has to work part time to pay his bills and visit family in California.

"Social Security isn't keeping up with the cost of living," Emery said.

Published: Fri, Aug 26, 2016

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