Previous studies have found that Americans' incomes tend to drop sharply when they retire. This new study, by defining income more broadly and tracking incomes over more than a decade, finds the newly retired have much less trouble keeping up their lifestyles than previously thought. "We do not find large, abrupt declines in income or increases in poverty upon retirement," Bee and Mitchell write.
And there's more good news: Retirees are less dependent on Social Security, the paper finds, than previous estimates have suggested.
Previous studies had also found that poverty rates were more than 50 percent higher for people 85 and older compared to retirees in their late 60s and early 70s—suggesting that the longer you live, the more likely your money is to run out. The new estimates find poverty rates worsening much more slowly with age, rising from 6.7 percent for people 65 to 74 years old to 7.6 percent for those 85 and older. (While poverty rates are lower overall in the new study's estimates, its authors still find that older women are poorer than older men: The 2012 poverty rate for older women was 8.5 percent, compared with 4.9 percent for older men.)
If older Americans have more economic resources, that's something to celebrate. But the study's conclusions are based on 2012 data, and economic realities for retirees are changing quickly.
The authors, who plan to update their analysis when they get access to more recent data, warn that their latest findings "cannot easily be extrapolated to future retirees."
Workers today might be diligently saving in 401(k)s and IRAs, but they're largely frozen out of the traditional pensions that guarantee a fixed income for life: The number of active participants in traditional pensions peaked in 1980 and has been steadily dropping ever since. And many of the remaining traditional pension plans, in both the private and public sectors, are facing financial difficulties.
Younger Americans are also worse off in other ways. Wages, stock markets, and real estate values were rising quickly when older Americans were working, but current workers have suffered long periods of stagnant wages and two major market crashes since 2000. The median wealth of Americans 62 and older leapt 40 percent in just a generation, a St. Louis Federal Reserve analysis found—but the same time, from 1989 to 2013, the typical net worth of younger families plunged, by 31 percent for the middle-aged and by 28 percent for families younger than 40.
The result: A widening wealth gap between America's old and young.
This article was provided by Bloomberg News.