Retirement & Financial Planning Report

A transition in the workforce caused by the aging of the baby boom generation has been picking up speed in recent years and will reach an important point in five years, but the trend toward extending working careers is expected to also continue, according to the Center for Retirement Research.

A study focused on the working patterns of those age 25-55, which it defines as peak working years. Those younger than 25 commonly are in a transition period of life when they are often in and out of jobs before their careers stabilize, while participation in the workforce starts to fall substantially after 55, it said.

The share of the population age 55 and older had been relatively stable for many years but began to increase in 2000 as the baby boomers aged. “The Bureau of Labor Statistics projects that the share of the 55-and-older population will continue to increase until 2020. The reason for the increase is that, in 2000, baby boomers were age 36-54 and were entirely in the prime-age group. Every year after 2000, a portion of the baby boom generation moved from the prime-age group to the 55-and-older category. By 2020, this transition will be complete, and the entire cohort – then age 56-74 – will be 55 and older,” the study says.

It said that while about 84 percent of those in the prime working years are in the workforce, that figure drops to about 60 percent at age 60, about 40 percent at age 65, and about 20 percent at age 70.

The overall percentage of those in the labor force after 55 is 32 percent. However, that figure has been increasing steadily since 1990, when it was 30 percent, and by 2020 is expected to hit 43 percent.

“This increase is attributed to many factors: the rise in Social Security’s Delayed Retirement Credit (which increases benefits for those who retire later), the movement away from traditional defined benefit plans with their early retirement incentives to 401(k) plans, a better educated workforce with less physically demanding jobs, and the desire in the face of rising health care costs to maintain employer health coverage until reaching Medicare eligibility at 65. Without this continued gradual increase, the impact of the aging of the population would be even greater,” it said.