2024 Retirement Trends in the United States

Retirement in the United States has shifted from a luxury to an integral phase of life, spurred by increasing life expectancies. Statistics indicate longer lifespans. Social connections, financial stability, and a sense of purpose are pivotal in navigating this evolving landscape, highlighting the need for proactive retirement planning strategies.
older latin woman works from her home desk | Retirement Trends

Tonight, we’re gonna talk about retirement trends in the United States. The whole concept of retirement has evolved through the years and through the generations. The retirement concept is a primarily American type of idea. I think a lot of other cultures and countries do a much better job of balancing work, play, life, family, than perhaps we do in America. We are still very much a work first type of culture that believes that, that once you get to a certain point, and you’ve accumulated a certain amount of assets and nest egg, then it’s okay to back off the throttle and enjoy the remainder of your life. So, we work hard in the early years and the mid years, and then we kind of shut everything down and enjoy and play, kind of in the last third of our lives. And so, in the early years, just a couple generations ago, when in fact, there wasn’t much of a retirement at all that most people have worked most of their entire lives either on a farm or in a factory. And they didn’t have the luxury of being able to ever stop working. So, the fact that we have now evolved in several generations to the point where retirement may make up a third of our lives is somewhat, I guess, a progress, you could say, if retirement is a particular goal of yours. It’s not for everyone and I will go into more detail on that later on in the show.

But one of the things that’s driving the idea of retirement and what retirement looks like, nowadays is an increase in life expectancies. As we as Americans live longer due to advances in medicine and health regimens and what we’ve learned through the years about how to stay active and healthy and engaged and mentally alert, and we’ve extended our live life expectancies, then that means there’s more opportunity for this concept called retirement. So, we need to start planning for living longer and average life expectancy continues to increase. And keep in mind, average life expectancy is just a midpoint. It’s not the endpoint. And so, you may need to plan on the probability of living much longer than you expect, particularly if you are a nonsmoker in excellent health. And so, one of the things we’ll talk about is, retirement is not the end, it’s just a transition phase. And if you do have another third of life in front of you, that’s no time to get conservative in your financial planning and in your investment management. You should still remain invested for growth, to allow your money to keep pace with inflation.

Retirement Statistics

So just to give you some ideas, and throw out some statistics here:

Average Life Expectancies for Women, Men, and Couples

  • Average life expectancy, if you make it to age 65, for women is about 84½ years old, and for men, it’s 82 years old.
  • Now, in about 40-50 years, that is projected to increase for women to age 89. And men 87. And so those are the average life expectancies, if you make it to age 65, and what is the probability of making it to certain ages.
  • So, if you make it to 65, your probability of making to age 85, for women 71%. Probability of a man living to 85, if he’s at least 65, 62%. And if you part of a couple, at least one is expected to live to 85 years, that’s an 89% probability. So, people who remain a couple, in their later years, have a greater probability of living longer. Living with another person, spouse typically, actually enhances your life expectancy. You have two people to care for one another. You have two people to share events with, to go places with, to talk to, to explore ideas – that keeps you alive and vital, and helps reduce the aging process. Somewhat not physically, of course, but in many respects, somewhat mentally.
  • If you made it to 65, the probability of making it to 90, 52% for women, 41% for men. And if you’re part of a couple, the probability of one of you living to that age, 72%.
  • To make it to not age 95, 30% for women, 20% for men, and 44% if you are part of a couple.

 

So, we are seeing much longer lifespans than any time in history, really. The average life expectancy continues to increase. Now, I know I believe I’ve read recently where US life expectancies might have slipped back a little bit here recently. I would consider that just a short-term blip and not part of some long term trend. I think the evidence is undeniable that life expectancies continue to expand as time goes along, again, thanks largely to medicine and are better understanding of how to manage the aging process.

Percentages of Older Americans in the Workforce

One of the things that means is that there are more older Americans in the workforce, more people are working later in life, usually motivated by the desire to do so. In fact, the percentage of people in the labor force in the US in 2020, from 65 to 74, is about 27%. 27% of people aged 65 to 74 are in the workforce and 9% who are 75 years old or older are in the workforce as well. And there’s a variety of reasons why people stay engaged in the workforce. They basically break into two camps. Sometimes people need to continue to work. Other times people want to continue to work.

Choosing to Stay in the Workforce

Staying in the Workforce for Financial Reasons

For those who need to stay in the workforce, the reasons they cite, primarily for doing that is they want the extra income. That’s one of the biggest reasons: “I just liked the extra money”, “it provides me with more of life’s luxuries and so, I’m going to keep at it for a little while.” And then there’s those that didn’t build up much of a nest egg, didn’t have much retirement savings, and so, they gotta keep grinding away and pounding the rock, if that’s the way it feels for some. For others, they really enjoy it, but they gotta keep going. And then about 17% need to make ends meet as well.

The moral here is for people who need to work is you got to start your planning earlier. Okay, the moral in those stories are, the earlier you start saving and investing, once you get into the workforce, the more options you will have later in life. And if you don’t take those options, or you don’t take the opportunity to save and invest early on, then you have to try to do it more aggressively later in life and play catch up. And some people just never do. You know, it’s we live in a very consumerist society. It’s much easier to spend today and try to save tomorrow. But we know from professional experience that when you do it that way, very rarely is there anything left over tomorrow. You have to save first, spend second, if you want to build up a comfortable nest egg and give yourself options later in life.

Staying in the Workforce, but Moving to Part-Time

For those people who want to continue to work, the main reason they cite in doing that is to stay active and stay involved. And this is absolutely true. We’re seeing this more and more in our practice, we’re seeing more employers open to the idea of instead of a heartbreak retirement, giving their long tenured employees an option to maybe slide back into part-time work at the same company. Maybe not in the same role. Almost always with reduced responsibilities, but that’s usually welcomed by the employee as well. So instead of full time work and full-time responsibilities, the full load of responsibilities, maybe going to a Monday, Wednesday, Friday type of situation, or Monday through Wednesday, and having yourself a four day weekend, something like that. You usually drop back to part-time status, maybe probably get your benefits cut a fair amount. But that can be okay if you’ve done your planning properly. And that we have seen to be a real good win-win situation for both parties. The employer gets an inexperienced employee who has a lot of corporate knowledge, can use that to improve, maintain quality of performance, train other people, instill the company culture in the younger generation, and then the employee gets reduced workload, reduced responsibility, less stress, more time off to do other things. And of course, a reduction in pay and probably a reduction in benefits. But, the alternative of a heartbreak retirement keeps you active and engaged, get you a little bit of income at the same time. And we often find that when clients have that opportunity, while they may have been looking forward to retirement and wanting to make a hard break, a lot of times, if they’re given the opportunity to just cut back to part-time status, and they take it, they find that they are rejuvenated, that they are much happier at work, which means they come home much happier. They’re much better in their personal relationships, because of a reduction in stress. And they’re still valued. They still contribute. And they still have a reason to get up in the morning and do something active and something that’s valuable that somebody needs them to do. And that’s really important, as you transition into retirement, when that opportunity gets taken away. Sometimes people, especially men, can feel a little bit lost.

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Wealthway Financial Advisors

Creating A Healthy Retirement

WNIS : Hey, Kevin, if I can jump in here with you for just a second. I remember something, 10-12 years ago, 15 years ago at this point, your former partner, Dan Bunting, said something about this topic that’s stuck with me. And it still sticks with me. And I’ve said this to multiple people, including my own mother, before she retired, and Dan said, if you’re going to retire, he asks people I forget exactly the words, but I’d asked him What are you doing on day one? Oh, well, I’m gonna go play golf. What are you doing on day two? Well, I don’t really know you’re not ready to be retired. Because if you don’t know what you’re getting by week two, you’re going to be bored out of your mind, or you’re going to be broke because playing golf or fishing is quite expensive. Well, does that still hold semi-true for most people?

Kevin Zywna, Wealthway Financial Advisors : Yeah, we’ve learned through the years, and we counsel our clients,

you can’t just have something to retire from. You have to have something to retire to.

And I’ll give you some specific ideas of what that’s like in the second half of the show. But right, you bring up a great point they mean is there’s sort of a romanticism and a mythology around the idea of being retired. You no longer have to deal with your coworkers, your customers, your bosses. You’re lying on a beach under a palm tree. You’re strolling a golf course, you’re walking the beach with a pina colada in your hands. And that is great, sometimes for a portion of the time and you should do that you should do those things. Absolutely, you should take a breath and slow down and smell the roses.

But there comes a time when there needs to be more. The mind and the body has to be exercise or else it atrophies. We have seen that firsthand in some of our older clients. We’ve done a much better job of getting out in front of that with our clients and educating them on that. The idea of sitting on your porch in a rocking chair, watching the time go by is not healthy. That’s not good and daytime TV is a soul sucker. You have got to get out of the house. You have got to get hobbies in your house – knitting, crochet, painting, pottery – if you don’t want to go outside. But, you have to have activities to stimulate the mind and exercise to stimulate the body. And that’s a healthy aging process. The idea of no stimulation, of no activity, of lying in a hammock for the bulk of the day is not healthy, the brain and the body atrophies at a much quicker pace. And that’s not a healthy retirement.

Staying in the Workforce Because They Enjoy It

Now there’s a segment of people who want to continue working, it’s because they enjoy it, they enjoy their job, they enjoyed the gratification they get from it. The feeling of doing good of helping others of providing a valuable service. I know, I personally get huge validation from the work that we do for our clients on behalf of our clients. Just a couple of weeks ago, we had somebody we’re meeting with clients, and he said, “Kevin, you change my life” and not Kevin, but Kevin and the Wealthway team helped changed his life. And he was able to, he said my wife and I are at a place we never would have been to if not for the help of the people here at Wealthway.

So you know that stuff, you can’t put a price on that. You can’t put a price on how good that makes someone feel. So, if you enjoy your job like that, then why stop, right? There’s no reason that you don’t have to stop at 65 because society says you need to keep working if your employer will allow it.

Staying in the Workforce Because of Job Opportunities

Another big reason why people stay engaged in the workforce: job opportunities. So maybe you have the opportunity at a promotion, or a maybe a different role that you’ve always wanted to try, but you never had the opportunity and you’re being offered it at age 65. That’s a good reason to stick around. And then some people just try a new career something completely different than what they were doing before. So, they stay in the workforce, but do something different than what they were doing before.

Caller Question: Taxation of Social Security

My question was, I’m a little miffed on when to take Social Security. How much of it is taxed? And do you think it’ll still be around?

Kevin Zywna, Wealthway Financial Advisors:  Okay, there? Well, there’s a lot there. How old are you, David?

Caller: I’m 60. Okay.

Kevin: Are you currently still in the workforce?

Caller: Yes.

Kevin: And how long do you intend to remain in the workforce?

Well, I didn’t talk to someone like you earlier. So that might be a while.

Kevin Zywna, Wealthway Financial Advisors 

Well, then I’ll give you some parameters here. First of all, yes, Social Security will be there certainly, for you will most likely be there for everyone who’s born today. I do think that subsequent generations though, people in their teens and 20s now, will have to contribute more into the system and accept less of a benefit than their predecessors have enjoyed. But it will be there in some form or fashion. And certainly, people who are close to receiving the benefits from the Social Security system, I don’t think there’s anything to be concerned with there. What you see on your Social Security statement, I think you can rely upon.

Now to your situation in particular, while you can claim a Social Security benefit as early as age 62, you usually don’t want to do that as long as you’re continuing to work and earn income. So, your full retirement age, David, I would imagine it’s about 66 and a few months. Are you familiar with what that is?

Caller: I’m a teacher. So, I think I can just keep on going.

Kevin Zywna, Wealthway Financial Advisors 

Yeah, well, sorry, I meant as it relates to the Social Security claiming date, full retirement status. It’s been, it’s creeping up from 66 to 67, you’re probably in that window somewhere. So that does have a little bit of magic to it, the Social Security designated full retirement age. It doesn’t so much in terms of the dollar benefit that Social Security pays out, but it does as it relates to if you claimed early and continued to earn income. So, if you claim early from age 62, to your full retirement benefit, full retirement age, which for you is 66 and some months, if you did it before then and continued to earn income, then you’re going to have majority of your social security taxed, and you’re probably going to have to reduce somewhat by a portion of the earnings. Now you do get it back later on, when you reach your full retirement age. But, there’s really a good reason to do it that way, if you’re going to continue to work. So, in your case, David, you probably want and if you’re going to continue to work, you’re going to probably want to claim Social Security at your full retirement age of 66 and a few months, so that helped frame things out for you.

Caller: Yes. I guess now the question is, if you do work once you’re taking is there a certain amount that you can earn?

Kevin Zywna, Wealthway Financial Advisors 

Yeah. Okay. So, I should clarify, once you reach full retirement age, social security full retirement age, then you can work and earn as much as you want without the benefit being reduced. So that’s where the magic comes into that full retirement age.

Your working income will then reduce The Social Security benefit that you get, if that makes sense. So, you take it early if you’re going to kind of like shut down operations, you know, pretty much hard stop.

WNIS 

Now if. And I think David mentioned that he’s a teacher, if he starts claiming or if he changes careers and starts accepting his VRS pension, is that going to change that income?

Kevin Zywna, Wealthway Financial Advisors 

Right. Sorry. Yeah, no, that that does not count as income against the Social Security benefit. Pension income does not count against it’s the earned income – W2 type wages.

Caller : Thank you very much.

Retirement Age

So, most people when they are younger, think that they are going to retire at, on, or around age 65. That has kind of been the defacto official or unofficial retirement age for most people in the United States. But in actuality, most people do tend to retire at 62. Which, from the last caller, you might have heard that 62 is the age when you can first claim a reduced social security benefit. Coincidence? I think not. I think most people once they get to age 62, realize they can claim some social security benefit, and then choose to take it and stop working. Now if you have the assets to do that, that’s fine. If you have the income, the investments, the wherewithal, and the resources to retire comfortably at 62, and you want to, then by all means you should. I just don’t think most people do it that thoughtfully. I think most people get the opportunity for some money from Social Security and that’s what they take. So, like you said, most people think they’re going to retire at 65 – 64% of the population thinks they’re going to retire at 65, but only 28% actually retire at age 65. Most are retiring at age 62.

Expecting Unexpected Retirement

One thing to be aware of, we were talking about how life expectancies has have put older workers into the workforce or allowed them to remain in the workforce, but one thing you have to watch out for as well is you might not have complete control over when you retire. Right, there are situations out of your control that may necessitate an earlier retirement than you expect. So, you should consider having a backup plan. And you might have to be prepared to withdraw income and make your portfolio, your investment portfolio, lasts longer than you anticipate.

Reasons for Early Retirement

So, the number one reason of people retiring earlier than planned is health reasons. About 36% people health reasons or disability have to stop full time work.

Also company downsizing or closing, completely out of your control. Layoffs, you know, when there is a layoff, usually the first group to be laid off is the most expensive group of employees. And the most expensive group is usually the longest tenured group of employees. So that means the older workforce are usually the first to let go. So about 32% of people who were forced to retire early did so due to company downsizing and closing.

And then there’s care for a spouse or other family member maybbe aging parents in their 80s or 90s and you’re in your 60s. That we are aware of situations when people have to step out of the workforce to care for their aging parents.

Now those who want to retire early, usually do so because they can afford it. They’ve done their planning properly. They saved up enough money. They have a good investment portfolio. About 41% of the people who retire early who choose to do so because they can afford it. And about 19%-20% do it because they want to do something else, they just want to go in a different direction, want to experience a different element of life. And then about 15% do it because their employer offered incentive or early retirement and they’re gonna take it and run.

So just be mindful of the fact that the best laid plans of mice and men often go awry, and you could be facing retirement little bit sooner than expected.

Caller Question: Social Security & Delaying Retirement

Hi, Kevin. I just listened to the earlier gentleman that was talking about security. And it led me to a question. Now I have been a widow for 20 years. I’m going to be 64 this year and I believe my full retirement age is supposed to be 67. So, am I understanding that correctly that when I turned 67, I can work full time just like I do now and collect full-time salary? And also, then collect my Social Security. Is that a benefit? Or should I cut that off? Like start working part-time then?

Kevin Zywna, Wealthway Financial Advisors 

First of all, Linda, if you’re 64, I think your full retirement age is actually a little less than 67, but close enough for conversation purposes. So, once you hit your Social Security full retirement age, then you can earn as much as you want without any reduction to your Social Security benefit. Okay. So, if you’re going to continue to work, it usually pays to delay Social Security until your full retirement age. Now you don’t have to take it then either, you can continue to delay claiming your Social Security benefit up until age 70. And then each year you delay the benefit, your benefit increases by about 8%. So, the longer you wait, the more you eventually get. And for people who are in good health, non-smokers, have longevity in their family -so essentially, they have a long life expectancy – if you want to sort of maximize the you want to get the biggest social security bang for your buck. Then you do the math. It would pay to wait later than your full retirement age, perhaps up to age 70, to get the eventual larger benefit. So did that help?

Caller: Yes, it did. Okay, yeah. That was like a light bulb just went off in my head when you said that.

Kevin Zywna, Wealthway Financial Advisors 

Okay, good. Well, like I said, you can claim while you’re working and you hit full retirement age, then you can get the benefit without reduction. But you can also wait and we often counsel our clients to do that on purpose, to delay and get the higher benefit. Your mileage of course may vary depending on your particular circumstances and needs.

Caller: Okay. All right. Well, thank you very much for your help.

Tips For Aging Well

A lot of it driven by enhanced, extended life expectancies, we have more time on our hands, we have more opportunities to work later, we have more opportunity to live longer. And then, it also costs more to live longer. So, it is wise to plan for that longer life expectancy that most of us are beginning to enjoy.

So, I want to wrap things up by saying how does one age? Well, well, there’s like four key components of aging well. You need to have a sense of purpose, right? Like we talked about earlier in the show, you can’t just have something to retire from, you have to have something to retire to. You need a reason to get out of bed in the morning, you need a place to go, something to do where you’re valued, you need to have a purpose.

And then you need to use time wisely. Use your time to work or help others or go to events or participate in activities. But use your time wisely. Retirement offers the gift of time to do the things that matter most to you. So, find out what they are. And use that time. Don’t just sit back and think retirement is going to drop into your lap. It’s not. You have to be an active participant in it.

Then also you want to socialize with friends and family, spend time with others. You need to be around other people. Being a recluse in retirement, it atrophies the brain, your social skills. You need to have stimulation of other people, you need to hear different perspectives, you need to have conversations that challenge you, that excite you, that make you laugh, socialize.

And then finally, practice healthy behaviors. Exercise, walk pickleball, don’t drink to excess – except for maybe on New Year’s or during the party. You know, don’t smoke cigarettes – cigars, you know those are okay. But practice healthy behaviors and that’s how you have a good, healthy, long retirement.

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