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Tuesday, May 15, 2012

Baby Boomers Are Working, Not Retiring, in Response to the Economy

Thanks to my colleague, Shoshana Grossbard, for pointing out a recent analysis of labor force data showing that the economic downturn of the past several years has had the effect of keeping baby boomers in the labor force longer than they anticipated. The story is in the Investor's Business Daily.

As the jobs crisis wears on, with payrolls still 5 million below their pre-recession peak, the share of age 55-and-older Americans working has recovered to near a 42-year high.
Workers under 55 have borne the brunt of the jobs recession, which may mean that its economic effects — due to long-term unemployment, underemployment and stretched household balance sheets — may linger.
Among those 55-and-up, the employment-to-population ratio barely dipped even in the depth of recession and is now higher than at the end of 2007. The ratio among those 25-54 remains about 4 percentage points lower than before the recession started.
For the 65-69 and 70-74 groups, the employed shares are up 1.1 percentage points and 1.6 percentage points, respectively, over the past four years.
Older workers often have the kinds of skills that keeps them valuable in the labor force, if they choose to stay. That choice is clearly driven by a person's calculation of what their standard of living will be if they leave the labor force. Social Security pensions in the United States are designed to supplement income in retirement, but not replace it. The only way to retire successfully is to have saved enough money to do so. Of course, many baby boomers thought they had done this, only to have their savings devastated by the economic crisis brought on by the banking failures. And that is why they continue in the labor force--trying to match up assets with the expected number of years for which they will need a retirement income. Keep in mind that this number of years is steadily growing, which is why younger people today will not receive full Social Security benefits until age 67 (which still may be too young).


  1. I agree with this post. This trend is true with my parents and many of their friends that are approaching retirement age. They often express frustration that they are in no position to retire, and for the most part they all blame adult age children who are yet to become self-sufficient
    -Brant Cowan

  2. I also agree with this post. Many people in the older generation, such as my grandparents, are still working and saving money so that they can retire with a livable amount of money to survive on, because they know that they would not get a lot of money from their pension plans. My grandmother for instance used to work for AT&T back in the day and was laid off, because of this her social security that she receives every month is only $500 dollars. She cannot survive on that every month with bills to pay and unexpected hospital expenses so she lives her life always on a budget, which she has no problem doing. But I know that other people her age could not see themselves being able to survive on that amount, so they keep working even if it is a min. wage job.
    -Domenique Buchanan