Despite Popular Belief, The Sky Isn’t Falling on Retirement Planning

Despite the harrowing statistics and projections provided by countless studies on U.S. workers and retirement planning, the future is not as bleak as many reports portend, according to a recent analysis from the Urban Institute.

Americans are aging at the massive rate of 10,000 people reaching age-65 each day; traditional retirement financing methods are slowly disappearing into the past; and more retirees are entering their “golden years” with higher amounts of debt than previous generations. Each of these factors should stir any concerns for the fate of Americans’ retirement future, however, certain transformations that have occurred over the years are working out for the better. 

For one, better education and health have increased older adults’ employment prospects, while jobs have become less physically demanding, and Social Security and pension rule changes have made work more financially rewarding at older ages, according to the Urban Institute report, “How Retirement Is Changing America.”


Between 1994-2014, the Urban Institute notes the share of men participating in the labor force increased from 45-56% at ages 62 to 64, and from 27-36% at ages 65 to 69.

Meanwhile, over this same period, the share of women participating in the labor force has grown from 33-45% at ages 62 to 64 and from 18-28% at ages 65 to 69. 

“Working longer boosts lifetime earnings, increasing Social Security credits and the amount of resources workers can use to save for retirement,” states the Urban Institute. “It also shrinks the retirement period, so retirement savings do not have to last as long.”

Just as life expectancies have increased over the last several decades as a result of improvements in the development of modern medicine and health care, older adults are becoming healthier than they once were.

Between 1998-2012, the share of older adults age 80 and older in “fair” or “poor” health dropped from 43% to 34%, according to the Urban Institute. However, middle-aged adults in their 50s may reverse this trend, especially when considering between that 1992-2010, the share of adults ages 51 to 54 reporting “fair” or “poor” health increased from 17% to 22%, as diabetes has become more widespread. 

Even with some positive trends suggesting a bright future for retirees, older adults continue to face certain challenges that can have an adverse impact on their retirement plans and preparations.

For example, almost 1 in 4 adults age-65 and older were carrying mortgage debt in 2012, up from just over 15% in 1998, according to the Urban Institute’s calculations. At the same time, the median overall debt level for this age group neared $25,000 in 2012, up from less than $15,000 in 1998. 

The increasing debt burden on retirees is even more significant as traditional retirement savings methods shift from employer-sponsored pensions to defined contribution plans such as 401(k)s. In its calculations, the Urban Institute expects less than 10% of workers born between 1990-1999 to have a traditional pension in retirement, with defined contribution plans being much more “the norm.”

But even as traditional pensions are disappearing, the Urban Institute finds workers are saving more in employment-based retirement accounts.

Using data and projections pulled from the Dynamic Simulation of Income Model (DYNASIM), the Urban Institute finds the average combined value of retirement accounts and lifetime traditional pension benefits will be three times as high for 65-year-olds born n the 1980s, than for their counterparts born 50 years earlier. 

“But retirement accounts don’t accumulate automatically,” states the Urban Institute. “Workers must choose to make significant contributions each pay period, invest the funds prudently, resist the temptation to dip into their accounts before they retire, and manage their funds wisely after they retire.”

So while today’s retirees will be forced to face a changing retirement landscape than their forefathers, some of these changes shouldn’t signal the end of days.

“Despite a lot of things we hear, the sky isn’t falling on retirement,” said Richard Johnson, a senior fellow and director of the Urban Institute’s program on retirement policy, in a recent CNBC article. “People are going to still spend a lot of time in retirement, and a lot of people are going to do pretty well. In addition to the challenges that get a lot of attention, there are some positive developments going on as well. Our projections don’t show that things are going to be dramatically worse in the future than they are today.”

Written by Jason Oliva

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  • Wow, great article Jason! Those statistics Jason pointed out are exactly why we that are in the reverse mortgage industry have a future opportunity of a life time ahead of us.

    I am not saying the opportunities are going to fall in our laps but knowing how to capitalize on them will allow many have an awful bright future for themselves!

    I repeat myself an awful lot in my comments and continually go back to education. To capitalize on the opportunities out there, you need to know what you are doing and you must continually be learning and be up to date on all the changes occurring day to day.

    I have been in the reverse mortgage space for over 19 years and it seems I learn something new every day, in fact, I find myself realizing what a changing industry we are in and how much I have be on top of things!

    In closing, I say again, great article by Jason, this is an article for everyone to save in thier data banks. Jason gave us an awful lot of great information today. Thank you Jason!

    John A. Smaldone

  • I am not sure what the sky falling in on retirement planning has to do with the analysis supplied by the Urban Institute since retirement planning is not addressed in the content of the blog.

    John Smaldone is right that Jason did a good job of pointing out some interesting statistics. As to how those stats relate to the diminishing endorsements we are currently seeing, is not part of the blog.

    As seniors begin once again to appreciate their retirement financial situation and absorb how HECMs in particular can improve their cash position, no doubt HECMs will become a preferred solution. Hopefully, mass affluent seniors and more financial advisers will see HECMs for what they are, vehicles to provide more cash flow to their clients throughout retirement.

    The next few years will have their challenges but soon we should begin to detect a gradual but steady growth in endorsements. After all reverse mortgages can bring cash and cash reserves to bear like no other product currently available to those 62 and older.

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