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Retirement: Numbers and Trends

Retirement is often seen as a time to relax, reflect, and enjoy life. However, the reality of retirement is often more complex. In recent years, the landscape of retirement has changed significantly. Life expectancy has increased, the number of retirees has grown, and the cost of living has risen.

This article explores some of the key changes that have taken place in retirement. We will look at how these changes have affected the average retirement age, income, expenses, and activities. We will also discuss some of the challenges that retirees face today.

Retirement Age

The average retirement age has been increasing in recent years. In 1990, the average retirement age was 57.  By 2023, it is expected to be 62. This increase ca be due to a number of factors, including the rising cost of living, the decline in pension plans, increase in longevity,  better health, etc

Social Security eligibility starts at 62 years with minimum benefit and then goes up to maximum benefit at age 70.  As the Medicare eligibility age is 65 years, that is generally considered the  retirement age.  The  actual average retirement age is lower - around 62.  Hence, during a 3-year period, a significant amount of health insurance expenses comes out of savings in addition to other expenses.

Fig 1: Expected and actual retirement age

Life Expectancy and Social Security

The average life expectancy has been increasing since 1940.  Although  there appears to be a plateau from 2010 to 2019, followed by a drop in 2020 due to Covid. 

The average Social Security recipient's average age has been relatively constant for  both men and women between 72 and 74. 

It is interesting to note that the life expectancy has gone up much more than the average age of Social Security recipients. Life expectancy went up by 10.7/10.8 (Men/Women) years - from 65.6/71.1 (M/W) years in 1950 to 76.3/81.9 (M/W) in 2019. The average age of  Social Security recipient only went up  by only 1.7/3.2 (M/W) - from 72.2/71.1 (M/W)  year in 1950 to 73.9/74.3 (M/W) in 2021.  This possibly indicates that fewer young people are dying early thus bringing up the average expectancy, but the age distribution of the elderly mostly remained the same. 

Fig 2: Life expectancy


Fig 3:  Average age of Social Security recipients. 

Younger and Older Social Security Recipients

The share of the oldest  (85 or older) Social Security recipients has slowly increased till around 2005, and since then has been relatively constant at about 9% and 11% for men and women respectively. The share of youngest ( 62-64) recipients is low at about 5% and the trend is going down.

Fig 4: Share of Social Security recipients by age range for men.
Fig 5: Share of Social Security recipients by age range for women.

The approximate median ages of  65+ were  71.6 and 72.2  in 2020 for men and women respectively. 

The Army of 65+

In 2020,  there were about 53.4 million 65+ years olds,  that is about 16.4 % or 1 in 6 people.  The total number of Social Security recipients has been going up almost linearly. There is an upward inflection around 2009 - around the time Baby Boomers started turning 62.

Fig 6: Number of Social Security recipients. 

Daily Activities

How do we spend the time of the day as we progress in age?  Sleep and other personal care remain relatively constant at about 10 hours a day.  Time spent in leisure activities goes up in exchange for job-related activities - from 5 hours to  less than an hour during the retirement years.


Fig 7: Activities across ages.

Income in Retirement

The average  amount of Social Security benefits received has gone up from $419 ( 2023 $) in 1950 to $1945 in 2021. 

Fig 8 :  Average Social Security benefit received 

Social Security  is a significant component, about 1/3rd, of retirees' income. The mean income of 65+ in 2021 was about $47,221.

Fig 9: Sources of 65+'s income (SSA)

Of the 65+ population, 83% receive Social Security.  69 %, 42%, and 30% of the 65+ population have property  income, retirement income, and pension respectively.


Fig 10: Sources of income in %

The median income of 65+ is  $27,382, which is substantially less than the average of $47,221. Of those who earned wages and salaries, the median  income from that source was $41,227. The median property income was $1,814.  The median retirement income was $15,244.
Fig 11:   Median source of income

Expenses in Retirement

In 2021,  78% of 65+ were homeowners and 25% had mortgages.   The major expense for all age groups including 65+ was housing.  Disposable income was highest in TX,  due probably to lower housing costs and taxes, and higher income.  The disposable income for 65+ years old  was about 1.9% of  expenditure. This could be due to 65+ years olds managing their budget to fit their income or withdrawing just enough to pay for expenses. 

Fig 12:  Share of expenses of US 65+  and all ages  for 4 states.
 
Fig 13: Expenses in $ value of US 65+ and overall population for 4 states

Fig 14:  Income and expenses of US 65+ and all ages in 4 states.

Home Address

7 out of the top 10 metro areas with most share of 65+ are in Florida. The metros with the highest 65+ share in CA, NY, and TX are Redding ( 22,4%),  Glenn Falls  (21.8%), and Sherman-Denison ( 18.6%)  respectively. 

Fig 15:  Metros with the highest shares of 65+

CA (10%), FL (7.7%), TX (6.5%), and NY (5.8%) account for 30 % of the 65+ population. 

Hacking Retirement

One way the population has responded to longer life expectancy is by postponing  retirement - from about 57 in 1990 to 62 in 2023.  The life expectancy in that period changed from 72 to 76 for men and 79 to 82 for women. Hence, on  average about 15 years is spent in retirement. 

One of the ways earlier generations handled retirement is by getting help from offspring.  However, the falling birth rate has reduced or eliminated that option for many 65+ olds.

Moving to a less expensive place or a smaller house have been some of the most  popular ways to reduce expenses. However, with the high interest rate, high home prices and lack of housing inventory have all but eliminated these options for a while. 

Working from Home (WFH) is also expected to offer  new opportunities for both retirees and their care-givers. 

References:

  1. Life Expectancy, Age
    1. Figuring Out Your Life Expectancy Is Tough. How Not to Run Out of Money.: https://www.barrons.com/articles/age-life-expectancy-retirement-savings-money-d0f096e2
    2. Actuaries Longevity Illustrator, https://www.longevityillustrator.org
    3. National Vital Statistics Reports, https://www.cdc.gov/nchs/data/nvsr/nvsr71/nvsr71-01.pdf
    4. More in U.S. Retiring, or Planning to Retire, Later, https://news.gallup.com/poll/394943/retiring-planning-retire-later.aspx
  2. Retirement Planning
    1. Wade Pfau,  Retirement Planning Guidebook. 
    2. Expect to Live a Long Time? Plan for Rising Healthcare Costs, https://www.barrons.com/articles/healthcare-costs-retirement-seniors-51675979592?mod=article_inline
    3. https://www.annuities.com/
    4. Running Out of Money Is the Top Retirement Worry: Report, https://www.barrons.com/articles/money-top-retirement-worry-2830cc9f
  3. Age Demography
    1. S0103 | POPULATION 65 YEARS AND OVER IN THE UNITED STATES, https://data.census.gov/table?t=Older+Population&tid=ACSST1Y2021.S0103
    2. B11007 | HOUSEHOLDS BY PRESENCE OF PEOPLE 65 YEARS AND OVER, HOUSEHOLD SIZE AND HOUSEHOLD TYPE, https://data.census.gov/table?t=Older+Population&tid=ACSDT1Y2021.B11007
    3. C23004 | WORK STATUS IN THE PAST 12 MONTHS BY EMPLOYMENT STATUS FOR THE CIVILIAN POPULATION 65 YEARS AND OVER, https://data.census.gov/table?t=Older+Population&tid=ACSDT1Y2021.C23004
    4. S0103 | POPULATION 65 YEARS AND OVER IN THE UNITED STATES, https://data.census.gov/table?g=310XX00US41940&tid=ACSST1Y2021.S0103
    5. B19037 | AGE OF HOUSEHOLDER BY HOUSEHOLD INCOME IN THE PAST 12 MONTHS (IN 2021 INFLATION-ADJUSTED DOLLARS), https://data.census.gov/table?t=Age+and+Sex:Income+and+Poverty&g=310XX00US41940&y=2021&tid=ACSDT1Y2021.B19037
    6. B19037 AGE OF HOUSEHOLDER BY HOUSEHOLD INCOME IN THE PAST 12 MONTHS (IN 2021 INFLATION-ADJUSTED DOLLARS), https://data.census.gov/table?t=Age+and+Sex:Income+and+Earnings:Income+and+Poverty&g=310XX00US19660,23540,33100,36740,38060,41940,46060&y=2021&tid=ACSDT1Y2021.B19037
    7. B25072 | AGE OF HOUSEHOLDER BY GROSS RENT AS A PERCENTAGE OF HOUSEHOLD INCOME IN THE PAST 12 MONTHS, https://data.census.gov/table?t=Age+and+Sex:Income+and+Earnings:Renter+Costs&g=310XX00US19660,23540,33100,36740,38060,41940,46060&y=2021&tid=ACSDT1Y2021.B25072
    8. S0201 | SELECTED POPULATION PROFILE IN THE UNITED STATES, https://data.census.gov/table?t=Age+and+Sex:Class+of+Worker:Income+and+Earnings:Renter+Costs&g=310XX00US19660,23540,33100,36740,38060,41940,46060&y=2021&tid=ACSSPP1Y2021.S0201
    9. Nation Continues to Age as It Becomes More Diverse, https://www.census.gov/newsroom/press-releases/2022/population-estimates-characteristics.html
    10. Population Distribution by Age, https://www.kff.org/other/state-indicator/distribution-by-age/?dataView=1&currentTimeframe=0&selectedDistributions=65--total&sortModel=%7B%22colId%22:%2265%2B%22,%22sort%22:%22desc%22%7D
    11. U.S. and World Population Clock, https://www.census.gov/popclock/
    12. The Population 65 Years and Older 201 , https://www.census.gov/library/visualizations/interactive/population-65-and-older-2021.html
    13. Age Profiles of Smaller Geographies Don’t Always Mirror the National Trend, https://www.census.gov/library/stories/2023/05/aging-united-states-population-fewer-children-in-2020.html
  4.  Cost of Living
    1. https://www.sofi.com/cost-of-living-in-california
    2. Consumer Expenditure Surveys, https://www.bls.gov/cex/tables.htm
    3. The 10 Top US Cities Where a $100,000 Salary Goes the Furthest, https://www.bloomberg.com/news/articles/2023-03-15/10-top-cities-where-100-000-salary-goes-the-furthest?sref=Aqw61XEI
    4. In New York City, a $100,000 Salary Feels Like $36,000, https://www.bloomberg.com/news/articles/2023-03-15/new-york-city-prices-make-100-000-salary-feel-like-35-000?sref=Aqw61XEI
    5. Consumer Spending, https://www.bea.gov/data/consumer-spending'
    6. Metropolitan Median Area Prices and Affordability, https://www.nar.realtor/research-and-statistics/housing-statistics/metropolitan-median-area-prices-and-affordability
    7. https://livingwage.mit.edu/
    8. https://www.bls.gov/cex/tables/calendar-year/mean-item-share-average-standard-error/reference-person-age-ranges-2021.pdf
  5. Expenses in Retirement 
    1. Expenditures of the Aged Chartbook, 2020, https://www.ssa.gov/policy/docs/chartbooks/expenditures_aged/2020/exp-aged-2020.pdf
    2. Income of the Aged Chartbook, 2014, https://www.ssa.gov/policy/docs/chartbooks/income_aged/2014/iac14.pdf
    3. Annual Statistical Supplement to the Social Security Bulletin, 2022, https://www.ssa.gov/policy/docs/statcomps/supplement/2022/supplement22.pdf
    4. Consumer Price Index, 1800-, https://www.minneapolisfed.org/about-us/monetary-policy/inflation-calculator/consumer-price-index-1800-
    5. Real Personal Income for States and Metropolitan Areas, https://www.bea.gov/data/income-saving/real-personal-income-states-and-metropolitan-areas
    6. 2022 Spending in Retirement Survey: Understanding the Pandemic’s Impact, https://www.ebri.org/docs/default-source/ebri-issue-brief/ebri_ib_572_spendinginret-6oct22.pdf
    7. This is the No. 1 expense, by far, for retirement-age Americans — and pros say it shouldn’t be, https://www.marketwatch.com/picks/is-your-retirement-spending-normal-heres-exactly-how-much-the-average-retired-household-spends-each-year-on-everything-from-housing-to-clothing-01669923485
    8. Table 1300. Age of reference person: Annual expenditure means, shares, standard errors, and coefficients of variation, Consumer Expenditure Surveys, 2021 , https://www.bls.gov/cex/tables/calendar-year/mean-item-share-average-standard-error/reference-person-age-ranges-2021.pdf, https://www.bls.gov/cex/tables.htm
    10. Table 3850. Consumer units with reference person age 65 and over by region of residence: Average annual expenditures and characteristics, Consumer Expenditure Surveys, 2020-2021, https://www.bls.gov/cex/tables/cross-tab/mean/reference-person-age-by-region-65-or-older-2021.pdf
  6. Life in Retirement
    1. Here’s What Retirement With Less Than $1 Million Looks Like in America, https://www.wsj.com/articles/retirement-under-1-million-america-846a6ab6
    2. Here’s What a $1 Million Retirement Looks Like in America, https://www.wsj.com/articles/heres-what-a-1-million-retirement-looks-like-in-america-11671890735
    3. Here’s What a $2 Million Retirement Looks Like in America, https://www.wsj.com/articles/heres-what-a-2-million-retirement-looks-like-in-america-11661702455
  7. Retirement Savings
    1. Retirees lost 23% of their 401(k) savings in 2022, Fidelity says, https://www.cnbc.com/2023/02/23/401k-retirement-savings-account-balances-sank-in-2022-fidelity-says.html
    2. Fidelity® 2022 Retirement Analysis: In The Midst of Inflation and Uncertainty, Retirement Account Balances Are Rising, https://newsroom.fidelity.com/pressreleases/fidelity--2022-retirement-analysis--in-the-midst-of-inflation-and-uncertainty--retirement-account-ba/s/095bb4a8-cf3a-484e-a911-bc0c61c460ff
    3. How America Saves 2022 How America Saves 2022 https://institutional.vanguard.com/content/dam/inst/vanguard-has/insights-pdfs/22_TL_HAS_FullReport_2022.pdf
  8. Retirement Incomes:
    1. PINC-08. Source of Income-People 15 Years Old and Over, by Income of Specified Type, Age, Race, Hispanic Origin, and Sex, https://www.census.gov/data/tables/time-series/demo/income-poverty/cps-pinc/pinc-08.html
    2. Home is where retirement funding is, https://corporate.vanguard.com/content/dam/corp/research/pdf/home_is_where_retirement_funding_is.pdf
    3. Improving the Measurement of Retirement Income of the Aged Population, https://www.ssa.gov/policy/docs/workingpapers/wp116.html
    4. Policy Basics: Top Ten Facts about Social Security, https://www.cbpp.org/research/social-security/top-ten-facts-about-social-security
  9. Wealth
    1. Americans Say They Need $2.2 Million to Be Considered Wealthy, https://www.bloomberg.com/news/articles/2023-06-13/how-much-money-do-you-need-to-be-rich-more-than-2-million-a-new-survey-finds?sref=Aqw61XEI
    2. Are You Rich? U.S. Wealth Percentiles Might Provide Answers, https://www.kiplinger.com/personal-finance/605075/are-you-rich
    3. Charles Schwab’s 2023 Modern Wealth Survey, https://www.aboutschwab.com/modern-wealth-survey-2022, https://content.schwab.com/web/retail/public/about-schwab/schwab_modern_wealth_survey_2022_findings.pdf, https://www.aboutschwab.com/research#panel-25-75--4026
    4. Here's how much money it takes to be considered wealthy in 13 major US cities, https://www.nbcbayarea.com/news/business/money-report/heres-how-much-money-it-takes-to-be-considered-wealthy-in-13-major-u-s-cities/3253180/?_osource=SocialFlowFB_BAYBrand&fbclid=IwAR0QhticCMeyfh-a0Gsbc1IqjU_JygRava_udOUxM3rBv1V0H_omToUCPAo
    5. What Does It Take To Be Wealthy in America?, https://www.visualcapitalist.com/net-worth-to-be-wealthy-in-america-2022
    6. Average American Net Worth by Age, Education, and More, https://www.firstrepublic.com/insights-education/average-american-net-worth-by-age-education-and-more
  10. Tools
    1. Where in the U.S. would you like to retire?, https://www.marketwatch.com/graphics/best-place-to-retire/?mod=retirement&mod=article_inline&mod=article_inline&mod=article_inline#division
    2. Social Security - 
  11. General
    1. https://www.census.gov/library/visualizations/interactive/bfs-by-state.html



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