Related UI Researchers

Publications on Retirees/Seniors

Career change is common at older ages. This report shows that 27 percent of workers employed full time at age 51 to 55 change occupations by age 65 to 69. More than one-third of older job leavers separate because of job layoffs or health problems, including nearly half of those who did not complete high school. Workers who change careers typically move into jobs that pay less than their previous jobs and are less likely to offer pension and health benefits. However, new careers tend to offer more flexible employment arrangements, less stressful working conditions, and fewer managerial responsibilities.

The stock market gained 35 percent between March 9, 2009 and May 5, 2009. For those who held on to their equities, these gains reversed some of the massive losses experienced since September 2007. This fact sheet examines the impact of the ongoing economic turmoil on older households and presents estimates of the retirement account losses to date.

The one-third drop in the S&P 500 index between year-end 2007 and 2008 raises concerns about retirement security since Americans now hold more equities through their retirement plans. Those near retirement will fare the worst because they have no time to recoup their losses. Midcareer workers will fare better because they have more time to rebuild their wealth. They may even gain income if they buy stocks at low prices and get above-average rates of return. High-income groups will be the most affected because they are most likely to have financial assets and to be invested in the stock market.

This commentary suggests ways of making the upcoming debate on Social Security reform more productive than some past efforts. Participants must be open to a range of solutions, financing must be transparent, and effects on disabled workers must be addressed. Reform efforts must acknowledge the changing economic environment, including increasing wage inequality, and shifting individual and family demographics. Guaranteed inflation-protected benefits are crucial, and the sacrifices necessary to balance the system should be shared across generations.

Recent growth in wage inequality has important implications for Social Security solvency and benefit distributions. Because only earnings below the taxable maximum are subject to payroll taxes, concentrated wage growth among higher earners generates less revenue than more evenly distributed growth. Social Security's progressive benefit formula increases benefit payouts when shares of workers with low wages grow. We use a dynamic microsimulation model to examine aggregate and distributional consequences of alternative scenarios about future wage growth. We find that relatively modest changes in assumptions about wage differentials generate marked changes in projected Social Security benefits, poverty, and long-term financing status.