As working habits shift among older Americans with greater labor force participation, so has their dependence on income derived from their own assets.

Despite declines in savings, older Americans have seen income almost double in the past twenty years, according to a paper from Boston College’s Center for Retirement Research. 

In 1990, earnings from employment among Americans aged 65 and older represented 18.4% of senior income, with 24.5% representing income from investments. 

By 2010, employment earnings accounted for 31.2% of senior income, whereas 11.3% derived from investments—the increase largely due to more Americans delaying retirement, according to the paper. 

Finding little evidence that trends in earned income and asset income were closely related as the motive for seniors to continue working, the report suggests three contributing factors.

First, a decline in the availability of retiree health insurance coverage encouraged many older workers to remain in the labor force, in the years prior to Medicare eligibility.

Second, pension coverage such as the replacement of defined-benefit (DB) retirement plans to defined-contribution (DC) plans dissuaded many from retiring, the study notes, as DBs created greater incentive for early retirement since workers could not receive the benefit until they left the job.

Lastly, the study points out a steady increase in the education of older workers, citing that the number of workers aged 65 with a college degree are roughly twice those of workers with less than a high school degree. 

Additionally, the study’s lead authors Barry P. Bosworth and Kathleen Burke believe that incentives for increased labor participation could reflect longer life expectancy, as well as reduced rates of morbidity.

“Overall, we believe that the changes in the source of income of the elderly are consistent with sustained improvement in their economic well-being,” writes Bosworth and Burke.

Read the abstract of the report here.

Written by Jason Oliva