CBS Moneywatch.com, Steve Vernon, February 9, 2016
Most of us know about the general trend: Americans are reaching retirement age at an unprecedented rate. But what does that really look like, and what are the implications? A new report from the Urban Institute titled “How Retirement is Changing in America,” provides some useful insights, and it offers three steps boomers can take to help them live long and live well.
First, let’s look at the basic stats: Forty-eight million Americans were age 65 or older in 2015, and the Urban Institute projects that number will increase to 74 million in just 14 years, by 2030. That’s an increase of more than 50 percent.
The 65-plus population — mostly retired — is growing faster than the adult population under age 65, most of whom are working. In 2010, there were four Americans of working age (25 to 64) for every person of retirement age (65 and over). By 2060, that will drop to a little more than two to one.
As a result, each worker will have to pay a larger share of their income to support retirees through Social Security, Medicare, Medicaid and other public services. While this might sound alarming, it’s the inevitable result of two positive trends: Americans are living longer and having fewer children.
Here are the three life-improving steps for boomers:
One way to reduce the burden of retirees on working-age adults is to have more people work longer and retire later. Working longer increases Social Security benefits, allows more time to save for retirement and reduces the time spent in retirement, so retirement resources don’t need to last as long.
If you decide to work longer, it looks like you’ll have plenty of company. Between 1994 and 2014, the percentage of men age 62 to 64 who worked increased from 45 percent to 56 percent. For those age 65 to 69, the share increased from 27 percent to 36 percent. Similar increases occurred in the percentage of women working at both age levels.
But just deciding to work longer isn’t sufficient — most likely you’ll need to do some planning to make it happen.
Take care of your health
Another factor that’s helping reduce the burden of retirees on working-age adults is that, compared to prior generations, older Americans are improving their health. Between 1998 and 2012, the percentage of Americans age 80 and older in fair or poor health — the lowest ranking in the study — fell from 43 percent to 34 percent. Better health allows people to work longer and reduces spending on medical costs.
However, recent health declines among middle-aged adults may reverse this trend and could cause an increase in the future health-cost burden. Between 1992 and 2010, the percentage of adults age 51 to 54 who reported they were in fair or poor health increased from 17 to 22 percent. One reason is the increase in the prevalence of diabetes.
With this in mind, people approaching their retirement years would do well to join the millions of Americans who are exercising more and reducing their intake of sugar and improving other poor nutritional habits.
Nurture your social portfolio
Perhaps the most startling finding in the Urban Institute report is that more older people are projected to be living alone in their retirement years, a problem that’s particularly acute for women. In the next 50 years, about half of all women 65 and older will spend 10 or more years without a spouse, and about one-third of older men will do the same. One out of five older women won’t have any children to take care of them.
These projections point to the importance of actively nurturing social connections as a critical part of your retirement planning. Social connections can make your life more interesting and satisfying, and improve your health in the process.
Social connections help provide emotional support and assistance from people who can pitch in when you really need help. Working, volunteering, bringing together family and friends, pursuing interests and causes, actively participating in social media — these are all positive ways to build your social portfolio. You might also explore alternative living arrangements that enable close proximity to people who care about you.
While the challenges of an aging population may seem daunting, they result from the longevity revolution that’s allowing much longer lives. Boomers are the first generation that must rise to the occasion of dealing with longer lives for their parents and themselves. It’s a good challenge to take on.
To Your Successful Retirement!
Michael Ginsberg, JD, CFP®