FINANCIAL BY DENISE NORBERG-JOHNSON
Following five years of record lows, the
2014 survey results showed that 55 percent of workers are either very confident
or somewhat confident about their ability to live comfortably after retirement.
Higher confidence levels correlated with
higher household income and participation in a retirement plan. Only 10 percent
of workers with a plan were not at all confident, compared to nearly half of those
with no plan. About four-fifths of full-time
workers or their spouses have saved for
retirement, and participation in a retirement plan is a key driver.
Retirees are also more confident
about their long-term financial security
( 28 percent in 2014 versus 18 percent
in 2013), including the ability to pay for
basic expenses, medical expenses and
long-term care. However, 44 percent of
retirees and 58 percent of workers are
concerned with their level of debt.
More than a third of workers and
two-thirds of households with incomes
below $35,000 have less than $1,000 in
savings and investments. Three-quarters
of workers without retirement plans are
in this situation, and more than half of
these workers cite cost of living and day-to-day expenses as the primary reasons
why they are not saving for retirement.
Each month, more than 250,000
Americans reach the traditional retire-
ment age of 65, but fewer are leaving the
workforce at that point. During the recent
recession, billions of dollars in retirement
savings were lost, forcing many workers
to delay their leisure time. As the stock
market rebounded and confidence rose,
the “labor participation rate” (people
working or looking for work) among
Americans age 55 or older fell. In 2010,
about 10 percent of the baby boomer gen-
eration was retired. By March 2014, this
number increased to 17 percent.
The economic impact of the 75
million baby boomers (born between
1946–1964) created unprecedented rates
of employment, consumer spending
and home ownership. The peak working years of this generation produced a
record high in the labor force participation rate in the 1990s. In 2003, 82 percent
of baby boomers were still working,
but, within a decade, only 66 percent
Higher workforce participation
rates generally correlate with economic
growth. Retirees no longer produce anything directly, spend less and are more
likely to depend on others (including the
government or their children) for support. The “dependency ratio” measures
the number of people outside of work age
( 18–64) per 100 adults within that age
range. As the number of retirees (
dependents) increases, there are fewer working
people to support them and contribute to
The dependency ratio fell from 65 in
1980 to 59 in 2010 but is now on the rise.
The U. S. Census Bureau predicts a return
to 65 in 2020, and a peak of 75 in 2030. As
average life spans approach the mid-80s,
more people continue working past 65,
but most will retire well before age 80.
Defined contribution retirement plans
and concerns about the health of Social
Security create uncertainty about the
future. If pension investments fluctuate,
will the boomers outlive their money?
What impact will these trends have
on the economic health of the country?
The good news is that the United States
is faring better than many other developed countries, where larger portions
of the populations are older than 65 and
continuing to increase. A higher rate of
immigration actually reduces the average
age of the U.S. population, since immigrants tend to be younger and have higher
birth rates than the general population.
By 2050, up to 22 million immigrants will
be added to the workforce.
The children of the baby boomer
generation—sometimes called the
“echo boomers”—are also entering their
prime working years. These teens and
20-somethings, born in the 1980s and
1990s, make up an even larger portion
of the U. S. population than the boomers.
As their parents delay retirement, these
children experience clogged career
pipelines and fewer opportunities for
The dependency ratio is likely to
flatten out by 2030, due to the higher
numbers of echo boomers and immigrants in the workforce. So, if you’re a
baby boomer, it looks like you’ll be able
to enjoy a comfortable retirement after
all—but you’ll have to unclog the career
pipeline and let your children earn
enough money to support you if you do
outlive your money.
Will you outlive your money?
AMERICAN WORKERS are growing more confident about having enough money
to fund a comfortable retirement, according to the latest Retirement Confidence
Survey (RCS) sponsored by the Employee Benefit Research Institute (EBRI), the
American Savings Education Council (ASEC), and Mathew Greenwald & Associates. The longest running survey of its kind, RCS measures responses from a sample
of 1,000 randomly selected participants, age 25 or older, about their projected retirement income, who they rely on for retirement advice, their savings levels and types
of investments, and what would motivate them to save more. The survey can be
found at www.ebri.org/pdf/surveys/rcs/2014/EBRI_IB_397_Mar14.RCS.pdf.
NORBERG-JOHNSON is a former subcontractor and past president of two national
construction associations. She may be reached at email@example.com. T H