Americans are retiring later in life versus 30 years ago

The phrase “keep on truckin’” seems apt when it comes to when folks are retiring.

The average retirement age has crept up by four years over the past three decades, from 57 in 1991 to the current 61, according to Gallup's annual economy and personal finance survey of 1,018 adults.

Meanwhile, the Gallup researchers predict that if active workers retire when they plan to, the average retirement age will increase even further in the coming decades.

“The increase in employment among older people is one of the most important changes to the labor market over the past quarter century,” Richard Johnson, director of the Program on Retirement Policy at the Urban Institute, told Yahoo Money. “Someone ages 62 to 69 in 2019, just before the pandemic began, was 47% more likely to participate in the labor force than someone in that age group 25 years earlier. That’s an enormous gain.”

And it’s a good thing. More time earning income and socking away funds for retirement has become imperative for many people due to a dearth of savings, longer life spans, and the soaring cost of out-of-pocket health care costs even after Medicare benefits kick in.

More older workers in the labor force

From 1991 to 2022, the biggest decline in retirement came from folks in the 55-59 and 60-64 age ranges. Only 11% of 55- to 59-year-olds are retired, down from 19% in 1991, while 32% of 60- to 64-year-olds are retired now, down from 41%, according to the Gallup survey.

Those over 65 are staying on the job longer as well. More than two-thirds, or 76%, of U.S. adults aged 65 to 69 are still working, up from 70% thirty years ago. Septuagenarians are on the job, too. While 83% Americans who are aged 70 to 74 have officially retired, that’s down from 88% in 1991.

For those aged 75 and older, labor force participation is projected to rise from 8.9% in 2020 to 11.7% of that cohort by 2030, according to the Bureau of Labor Statistics. That would be a 96.5% increase between 2020 and 2030.

The recent Gallup survey also found that the age that people target for retirement has jumped, too. People anticipate they will retire at 66 today, compared with 60 in 1995, the first year that it tracked that data.

“The fundamentals that kept older people at work persist,” Johnson said. “Participation rates have increased because work incentives have increased. Work at older ages is more financially rewarding and less arduous, in general, than it used to be, and retiring early is more costly.”

Why are there more older workers?

The uptick in retirement ages has been driven by several fundamental changes.

In 1983, a gradual increase in the age for collecting full Social Security retirement benefits began to be phased in and is now complete. The full retirement age increased from 65 to 67 over a 22-year period. The incentive to keep working and delay tapping Social Security until age 70 was also added. Between full retirement age and 70, you earn delayed retirement credits, which is roughly an 8% per year annual increase. The benefit increase stops when you reach age 70.

Many jobs are also less physically demanding than they once were, making it far easier to work longer with an aging body. The decline in employer-provided retiree health insurance has pushed workers to postpone retirement until they’re eligible for Medicare at age 65.

“Hardly anyone offers retiree health benefits any more,” Alicia Munnell, director of the Center for Retirement Research at Boston College, told Yahoo Money. “Less than 20 percent of large firms – 200 or more employees – offer retiree health insurance to current workers. Smaller firms traditionally have rarely provided this benefit.”

Companies also shifted from defined benefit plans to 401(k) plans that people can continue to contribute to as long as they keep working. It also puts the onus on the worker to fund much of their own retirement, which most workers are woefully behind on.

Only about half of workers with 401(k) plans said they feel confident they’ll reach their retirement savings goals, according to the Schwab survey. The amount they believe they need to have saved for retirement: an average of $1.7 million.

There’s also long-term unemployment that can hit older workers especially hard. For instance, the percentage of jobseekers ages 55 and older who were long-term unemployed in July was 24.2%, compared with 17.2% of jobseekers ages 16 to 54, according to the Bureau of Labor Statistics. Those are people who have been searching for a job for 27 weeks or longer.

Nearly two-thirds (63%) of job seekers 45 and older are out of work for more than a year, versus only 36% of job seekers 18 to 34, according to a report from Generation, a global employment nonprofit that surveyed 3,800 employed and unemployed people and 1,404 hiring managers.

“This is important because age bias can relegate talented, skilled workers to lower-paying jobs, or multiple jobs,” Ramona Schindelheim, WorkingNation editor-in-chief, told Yahoo Money. “These 20-plus extra years should be key money-earning years, preparing them for their final retirement years. Instead, many of these same workers might have to work even longer to make up the difference.”

Why Gallup’s crystal ball could be wrong

The question is will the retirement age keep climbing? Gallup’s report said “If active workers retire when they plan to, the average retirement age will increase even further in the coming decades.”

The reasoning:Those changes and incentives to Social Security payouts authorized in the 1980s are now in play for workers hitting retirement age today. Plus, “longer life spans for U.S. adults may also be a factor in later retirement ages, with workers perhaps seeing a need to save more money, anticipating a retirement that could last as long as 30 years, particularly with the cost of living increasing,” according to the researchers.

Still, that's only a forecast.

“There are several factors that have kept workers on the job longer, but that doesn’t mean that trend will continue,” Munnell said. “The conclusion from my analysis is that a lot of the forces that have led to this increase in working to a later retirement age have sort of worked their way out.”

Munnell’s data shows that in 2021, the average retirement age for men was closer to 65, roughly three years later than in the mid-1980s and early 1990s and for women, it was 62.

“Yes, we've had this increase in the average retirement age in the U.S. since 1991,” Munnell added. “I don't think we should expect another similar increase over the next 30 years. Let’s kill that notion.”

Kerry is a Senior Columnist and Senior Reporter at Yahoo Money. Follow her on Twitter @kerryhannon

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