Why Baby Boomers Can't Retire At 65

Wednesday, 19 Feb 2014 07:26 AM

By Patrick Watson

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The Labor Department's January employment report, while encouraging in some ways, left plenty of questions unanswered.

As of last month, the official unemployment rate had improved to 6.6 percent — still too high, but much better than the 10 percent it reached in the last recession. At the same time, the improvement occurred in part because, in Washington's language, "not working" is not the same as "unemployed."

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To count as unemployed, you must 1) be without a job, 2) be able and willing to work and 3) have actively sought employment in the last four weeks. These characteristics make you a participant in the "labor force."

Fewer Americans than ever fall into this category. Some analysts tell us a wave of baby boomer retirements is changing the statistics. I'm sure that's true, but I also see a strange aberration in the numbers. It makes me think of the Sherlock Holmes story in which a dog didn't bark.

The baby boom generation began in 1946, so its oldest members turned 65 in 2011. Yet far from rushing into a leisurely retirement, boomers are postponing it longer than previous generations did.

According to Labor Department data, the "participation rate" for Americans aged 65 or older rose from 11.5 percent in 1992 to 13.2 percent in 2002, and then to 18.5 percent at the end of 2012. As of last month, it was still near that level.

What does this tell us? Twenty or so years ago, only about 11.5 percent of Americans who had reached age 65 were "participating" in the labor force. They either had a job or wanted to have a job.

The other 88.5 percent were "not participating." That means they were either a) physically unable to work or b) had sufficient income to live without a job. We call this state "retirement."

Now the corresponding figures are 18.5 percent and 81.5 percent. This is a big difference. Americans are waiting longer to retire. Some of it is no doubt voluntary; medical advances allow us to stay healthy longer than was possible in 1992.

Yet practically every day I hear from over-65 readers who are working not because they want to, but because they have no choice. A perfect storm hit the older boomers in the last few years. Most didn't save enough for retirement. Many of those who did save took big hits to their wealth in the 2008-09 firestorms.

Persistently low interest rates since 2009 made safer investments unappealing. Anyone who plunged back into stocks near the 2009 low has done pretty well, but I don't know many boomers in that category. I see why people chose to stay on the sidelines. We went through some scary times back then.

Now the boomers are sandwiched in the middle. Many still care for their elderly parents while their adult children are debt-laden and unemployed. The lofty retirement dreams which were probably unrealistic in the first place hit a whole series of nasty speed bumps.

Millions of boomers will keep working into their 70s not because they want to, but because they have no alternatives. The only real choice is to accept this new reality and make the best of it.

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