A rising cost of living and meager Social Security benefits are forcing many older Americans to delay retirement, potentially creating unintended consequences for younger generations.
According to the 2023 retirement confidence survey from the Employee Benefit Research Institute (EBRI), 33% of American workers plan to retire beyond age 70, or never.
The study found that workers who aren’t confident about their financial security plan to stretch out their working years the most.
Perhaps shockingly, 73% of workers said they plan to continue working for wages in retirement. By comparison, 30% of current retirees work for wages—a figure that’s been on the rise over the past three decades.
This will present a “tricky situation” for younger Americans hoping for career progression, according to career consultant Colleen Paulson.
There are only so many high-paying jobs and promotion opportunities. If more experienced workers stay longer, younger generations have fewer options.
“If you’re not moving up in the corporate ladder because there’s no space for you to move, then your earning potential is actually stalled,” Jasmine Escalera, a student mentor at New York University, told Axios.
“We may end up seeing a ripple effect where younger generations have a hard time increasing their earning potential, which could potentially also impact their ability to retire at a certain age as well,” said Escalera.
Competing for jobs with Baby Boomers, however, is just one of the many unique challenges facing younger generations today.
The problem of wage stagnation
Even if younger generations do land a job, wages aren’t what they used to be relative to the cost of living.
According to the American Enterprise Institute, real hourly wages (adjusted for inflation) grew by only 0.7% between 1973 and 2022. In absolute terms, this equates to a paltry 18 cents per hour.
Real wages declined in 2022 as surging inflation outpaced earnings growth. However, these fortunes may have reversed in 2023, as real household incomes grew by 4% compared to the year before.
Nevertheless, the underlying trend shows that average Americans have not been able to increase their earnings in any meaningful way for decades.
As the Economic Policy Institute explains, “trends in hourly wage growth have profound consequences for American living standards” since the “vast majority of Americans rely on their paychecks to make ends meet.”
A lack of earnings growth has also made it harder for workers to save enough for retirement.
This largely explains why most Americans over the age of 50 don’t think they’ll ever be able to retire comfortably, based on a recent AARP study.
Americans across all generations say they’re woefully underprepared for retirement. According to research from Northwestern Mutual, the typical American thinks they’ll need $1.46 million to retire comfortably. That’s 55% higher than in 2020.
The problem is that the typical 401(k) balance is about $1.37 million shy of that lofty goal.
Last modified: September 13, 2024
