The Changing Face of the American Retirement

There are a lot of doom-and-gloom headlines out there about how retirement is changing for the worse in this country. Maybe you’ve read that Social Security is eventually going to disappear. That pensions are going away. That the cost of retirement is increasing. That you’ll have to work until you’re dead.

Take a deep breath. It’s not all bad news.

Next Avenue recently published an article about how Baby Boomers are changing what it means to be retired in America as of 2017, writing:

“While many boomers are still clinging to the remnants of their rapidly fading youth, rather than leading a social revolution dedicated to achieving equality for older people, it’s fair to say they are indeed redefining the concept of aging for the better. The model of aging, forged in the postwar era when boomers were children, is a shadow of what it used to be, particularly when it comes to retirement. Rather than end one’s career at a predetermined age, usually 65, to embark on a life of leisure in a sunny, warm place, most of today’s sexagenarians and septuagenarians are working as long as they can and staying put in their homes. For them, their third act is not all that different from their second, a lifestyle choice that is serving to blur the lines of age.”

Yes, retirement is changing. But so, too, is aging in America—much for the positive. You’re not your grandmother. So it stands to reason that this isn’t your grandmother’s retirement.

Let’s take a look at some of the facts.

Americans are living longer, healthier lives.

Less than 40 years ago, Americans were retiring at 65 because they had to. In 1980, the average American woman could expect to live to about 77, and the average man, just 70. In other words, by the time you hit retirement age, you were nearing the end of your life expectancy. These days, 65 is hardly considered elderly. Americans who reach 65 can expect to live about another 20 years, on average (one out of 10 can expect another 30 years).

And you can expect a better quality of life than your predecessors, too. From 1998 to 2012, adults aged 80+ in fair or poor health fell from 43% to 34%.

Many Americans are choosing to retire later.

Between 1994 and 2014, men in the workforce age 65-69 increased from 27% to 36%. Women in the same age bracket increased from 18% to 28%.

This is for a couple reasons. The most obvious is that because people are living longer, they need to account for the expenses involved in a longer lifespan. But that’s not all there is to it.

Some retirees enjoy their work and simply don’t want to stop altogether. Some are (reasonably) worried about boredom. Some decide to pursue income-generating passion projects that they never previously had time for. Add to this that older adults are generally healthier and more active, and many don’t see why they should give up working altogether.

Also, there are financial benefits to sticking out work—aside from the obvious of continuing to collect a paycheck. If you delay retirement past your full retirement age, you are eligible for delayed retirement credits (up to an 8% per year increase in benefits).

No one’s really counting on Social Security, anyway.

It’s true that Social security benefits are likely to change dramatically within the next couple decades. Current projections suggest that by the mid-2030s, Social Security benefits could be cut by up to 25%. But as it turns out, people aren’t really relying on Social security the way they used to, anyway.

Instead, more people are investing in 401(k)s and other retirement accounts. In 2016, just 35% of American workers said they expected Social security to be a major source of income (vs. 62% of retirees), while 46% of workers indicated work-sponsored savings plans (vs. 19% of retirees).

Projections show that by the time ‘80s-born Millennials turn 65, the average combined value of their retirement accounts and lifetime pension plans will be triple that of what 65-year-olds had 50 years earlier. (You just have to make sure you’re contributing.)

It’s true that retirement will never look the same again. But with improving health and longevity, the opportunity to pursue passion projects, and the ability to save more money than ever before, would we really want it to?

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rhian horgan

Rhian is the Founder and CEO of Kindur. Prior to founding Kindur, Rhian spent 17 years at JP Morgan building investment products for individuals. Rhian is passionate about the opportunity to leverage modern technology to simplify retirement decisions.