Americans Living, and Working, Longer

A new report notes that while longevity is increasing, the number of years Americans spend in retirement has not changed much over the last generation because they’re also working longer.

In “The Aging Economy: Improving with Age,” BMO Wealth Management notes that the Department of Health and Human Services reported in 2017 that the average lifespan for American men was 76.3 years, and for women 81.2 years, and that on average Americans spend 18 years in retirement. But at the same time, reports the Bureau of Labor Statistics, the percentage of people who left the workforce due to retirement over the decade 2004-2014 dropped by 4.4 percentage points, from 72.5% to 68.1%.

But the fact that Americans are living longer does not necessarily mean that retirement is unaffordable, argues the paper. It does mean, however, that “thoughtful and effective financial decisions have to be made.”

BMO found in its study of Americans age 55 and older that the top three concerns about living a long life had almost equal weight:

1. Health problems and costs: 46%
2. Being a burden on family: 45%
3. Financial security: 44%

The study also found that the top concerns about living beyond the average life expectancy were:

1. Maximizing retirement income: 22%
2. Outliving savings and investments: 21%
3. Long-term care needs affecting finances: 19%
4. Diminished capacity to make decisions: 15%

BMO also notes that there are added pressures facing the “sandwich generation” — working age adults who are raising children but also must meet the increasing needs of their aging parents. “The sandwich generation has been further stretched and is now less like a traditional sandwich and more like a 12-inch sub,” the report asserts. Other pressures include retirement saving, whether and how to support adult children, charitable giving, changing tax laws and regulations and the state of the economy.

As a result of these and other concerns, BMO says, many people keep working or become self-employed after retirement. They consider the rise of self-employment in that population a good thing, writing, “From a financial planning perspective, earning additional employment income beyond a ‘normal’ retirement age has a positive impact on making retirement funds last longer and achieving retirement and estate planning goals.”

BMO suggests that financial education is a key to meeting these challenges. “Learning more about personal finances and setting personal goals and plans is a valuable investment,” the paper says. And that, they suggest, is something that even people who have already retired still can find useful.