Older Workers: Employment and Retirement Trends

Older Workers: Employment and Retirement Trends

Older Workers: Employment and Retirement
Trends
Patrick Purcell
Specialist in Income Security
September 16, 2009
Congressional Research Service
7-5700
www.crs.gov
RL30629
CRS Report for Congress
P
repared for Members and Committees of Congress

Older Workers: Employment and Retirement Trends

Summary
As the members of the “baby boom” generation—people born between 1946 and 1964—
approach retirement, the demographic profile of the U.S. workforce will undergo a substantial
shift as a large number of older workers will be joined by relatively few new entrants to the labor
force. According to the Census Bureau, there will be 204 million Americans aged 25 or older in
2010. By 2030, this number will increase by 23% to more than 251 million. Most of this growth
will occur among people aged 65 and older. The Census Bureau estimates that while the number
of people between the ages of 25 and 64 will increase by 15.5 million (9.4%) between 2010 and
2030, the number of people aged 65 and older is projected to grow by 31.7 million, or 79.2%.
Labor force participation begins to fall after age 55. In 2008, 91% of men and 76% of women
aged 25 to 54 participated in the labor force. In contrast, just 70% of men and 59% of women
aged 55 to 64 were either working or looking for work in 2008. Labor force participation among
persons aged 55 and older is influenced by general economic conditions, eligibility for Social
Security benefits, the availability of health insurance, and the prevalence and design of employer-
sponsored pensions. For example, labor force participation among people 55 and older may
increase due to the trend away from defined-benefit pension plans that offer a monthly annuity
for life to defined contribution plans that typically pay a lump-sum benefit. The declining
percentage of employers that offer retiree health insurance also may result in more people
continuing to work until they are eligible for Medicare at 65.
Census Bureau data show that the percentage of men and women aged 62 and older who work in
paid employment has risen over the past several years. In March 2009, 52% of men aged 62 to 64
were employed, compared with 42% in 1990 and 47% in 2000. Of men aged 65 to 69, 33% were
employed in March 2009, compared with 26% in 1990 and 30% in 2000. Among women 62 to
64 years old, 41% were working in March 2009, compared with 28% in 1990 and 35% in 2000.
Among women 65 to 69 years old, 25% were working in March 2009, compared with 17% in
1990 and 20% in 2000. There also has been a trend toward more full-time employment among
older Americans who work. In March 2009, 69% of employed men aged 65 to 69 were working
full-time, compared with 56% in 1990 and 61% in 2000. Among working women aged 65 to 69,
54% worked full-time in March 2009, compared with 44% in both 1990 and 2000.
As more workers reach retirement age, employers may try to induce some of them to remain on
the job, perhaps on a part-time basis. This is sometimes referred to as “phased retirement.”
Several approaches to phased retirement—job sharing, reduced work schedules, and rehiring
retired workers on a part-time or temporary basis—can be accommodated under current law. The
Pension Protection Act of 2006 (P.L. 109-280) allows pension plans to begin paying benefits to
workers who have not yet separated from their employers at the earlier of age 62 or the pension
plan’s normal retirement age, which in most plans is 65. Some employers would like to be able to
pay partial pension distributions to workers who have reached the pension plan’s early retirement
age, even if it is earlier than age 62. This would require a change in federal law.

Congressional Research Service

Older Workers: Employment and Retirement Trends

Contents
The Aging of the Labor Force ..................................................................................................... 1
Long-Term Trends in Labor Force Participation Rates................................................................. 2
Recent Employment Trends Among People Aged 55 and Older ................................................... 5
Retirement Income Among Older Workers .................................................................................. 8
Employment Among Recipients of Retirement Income................................................................ 9
Social Security Retirement Benefits .......................................................................................... 10
Age When Benefits Begin ................................................................................................... 10
Retired Worker Beneficiaries as a Percentage of Each Age Category ................................... 12
Older Workers and “Phased Retirement” ................................................................................... 13
Current Approaches to Phased Retirement ........................................................................... 14
Phased Retirement and Pension Distributions ...................................................................... 14
Distributions from 401(k) Plans .......................................................................................... 15

Tables
Table 1. U.S. Population Age 25 and Older, 2010 and 2030 ......................................................... 2
Table 2. Labor Force Participation Rates, 1950 to 2008 ............................................................... 4
Table 3. Employment of Men Aged 55 and Older, 1990 to 2009 .................................................. 6
Table 4. Employment of Women Aged 55 and Older, 1990 to 2009.............................................. 7
Table 5. Receipt of Income from Employer Pensions and Retirement Savings Plans .................... 9
Table 6. Employment of Recipients of Pension Income ............................................................. 10
Table 7. Social Security Retired Worker Benefit Awards, by Age ............................................... 12
Table 8. Social Security Retired Worker Beneficiaries, by Age .................................................. 13

Contacts
Author Contact Information ...................................................................................................... 16

Congressional Research Service

Older Workers: Employment and Retirement Trends

he retirement of older workers has consequences for both their personal economic
circumstances and the nation’s economy. The number of people retiring each year affects
T the size of the labor force, which has a direct impact on the economy’s capacity to produce
goods and services. Other things being equal, fewer retirements in any given year would result in
a greater supply of experienced workers available to employers and fewer people relying on
savings, pensions, and Social Security as their main sources of income. Consequently, changes in
the age-profile of the population and the average age at which people retire have implications for
both the growth of national income and the size and composition of the federal budget.
To understand the effects of retirement on individuals and the economy, one must first define
what it means to “retire.” Retirement is most often defined with reference to two characteristics:
whether an individual participates in the paid labor force and whether he or she receives income
from a pension or Social Security. An individual who does not work for compensation and who
receives income from a pension or Social Security would be retired according to both parts of this
definition, while one who works for compensation and receives no income from a pension or
Social Security would not be retired according to either part of the definition.
Between these two extremes, however, there are many people who might be considered to have
retired based on one part of the definition but not the other. For example, individuals who have
retired from careers in law enforcement or the military—both of which typically provide pensions
after 20 years of service—often work for many years at other jobs while also receiving a pension
from their prior employment. In such cases, having retired from a particular occupation does not
necessarily mean that one has retired from the workforce. On the other hand, many people who
retire from full-time employment continue to work part-time to supplement the income they
receive from pensions and Social Security. If the majority of their income is provided by Social
Security, pensions, and savings, economists typically classify them as retired, even though they
continue to engage in paid employment. As these examples suggest, not everyone who receives
pension income is retired, and some people who work for pay actually are retired.
This report begins by describing the change in the age distribution of the U.S. population that will
occur between 2010 and 2030 and by summarizing the historical data on the labor force
participation of older workers. This discussion is followed by an analysis of data from the Census
Bureau’s Current Population Survey (CPS) on employment and receipt of pension income among
persons aged 55 and older. Employment trends among older workers are then discussed in the
context of data from the Social Security Administration on the proportion of workers who claim
retired-worker benefits before the full retirement age (66 for people who turn 65 in 2009). The
final section of the report discusses “phased retirement,” a process that combines reduced hours
of work with receipt of pension income.
The Aging of the Labor Force
As the members of the “baby boom” generation—people born between 1946 and 1964—reach
retirement age, the demographic profile of the American population will undergo a profound
change. According to the Census Bureau, the proportion of the U.S. population aged 65 and older
will increase from 13.0% in 2010 to 19.3% by 2030. The age-distribution of those 25 to 64 years
old already is undergoing a substantial shift toward a greater number of older individuals and a
relatively small number of young people entering the labor force.
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Older Workers: Employment and Retirement Trends

The data presented in Table 1 show how the age profile of the adult U.S. population will change
between 2010 and 2030. According to the Census Bureau, there will be 204 million Americans
aged 25 and older in 2010. By 2030, this number will increase by 23% to more than 251 million.
Most of this growth will occur among people aged 65 and older. The Census Bureau estimates
that the number of people aged 25 to 54—the ages when labor force participation rates are
highest—will increase by only 9.0%. The number of people between the ages of 55 and 64 is
projected to increase by 11%. Between 2010 and 2030, while the number of people between the
ages of 25 and 64 is projected to increase by about 15.5 million, or 9.4%, the number of people
aged 65 and older is projected to grow by 31.7 million, or 79.2%.
Table 1. U.S. Population Age 25 and Older, 2010 and 2030
(numbers in thousands)
Age Groups
Year
25 to 34
35 to 44
45 to 54
55 to 64
65 and Up
Total
2010
Male
21,181 20,701 21,992 17,475 17,292
98,641
Female 20,637 20,576 22,712 18,800 22,937
105,662
Total
41,818 41,277 44,705 36,275 40,229
204,303
2030
Male
23,686 24,237 21,924 19,625 32,294
121,766
Female 23,333 23,985 22,106 20,651 39,798
129,863
Total
47,020 48,223 44,029 40,266 72,092
251,629
Change 5,202 6,946 -675 3,991 31,683
47,326
%
change 12.4% 16.8% -1.5% 11.0% 79.2% 23.2%
Source: U.S. Department of Commerce, Bureau of the Census.
Long-Term Trends in Labor Force Participation
Rates
The labor force participation rate is the percentage of the population who are either employed or
are unemployed and looking for work. Labor force participation rates are higher at all ages for
men than women, and are highest for both men and women between the ages of 25 and 54. Over
the past half-century, labor force participation rates have tended to fall for men and to rise for
women. As the United States has moved from an economy based on “smokestack industries”
such as mining and manufacturing to a service-based economy, there has been an increase in
demand for highly-educated workers and relatively less demand for workers who are able to
perform physically demanding labor. At the same time that the economy has been producing jobs
that can be done by workers of more varied physical abilities, the two-earner couple has become
more common than it was 30 or 40 years ago. Finally, with near universal coverage by Social
Security and about half of all workers participating in employer-sponsored retirement plans, most
workers can anticipate retirement as a period during which they will remain financially
independent, rather than as a time when they will rely on their children for financial support.
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Older Workers: Employment and Retirement Trends

Men who are over the age of 55 are less likely to participate in the labor force today than were
their counterparts of a half-century ago. According to data from the Bureau of Labor Statistics, 5
out of 6 men aged 55 to 64 participated in the labor force in the 1950s.1 (See Table 2). By 1985,
only 2 out of 3 men in that age group were working or looking for work. Most of the decline in
the male labor force participation rate occurred over a relatively brief period, from about 1970 to
1985. Since 1985, the labor force participation rate among men aged 55 to 64 has fluctuated
within a relatively narrow range of 66% to 70%.
Among men aged 65 and older, the decline in the labor force participation rate began earlier, but
it also appears to have ended around 1985. Between 1950 and 1985, the labor force participation
rate among men 65 and older fell from 46% to about 16%. Between 1985 and 2008, the labor
force participation rate among men aged 65 and older increased from 15.8% to 21.5%.
From 1950 until about 2000, the labor force participation rate of women aged 25 to 54 rose
steadily, increasing from 37% in 1950 to 77% in 2000. Since 2000, the labor force participation
rate of women in this age group has leveled off, and the Department of Labor has projected that it
will remain relatively stable in the near future.2 Among women aged 55 to 64, the labor force
participation rate rose from 27% in 1950 to 52% in 2000. By 2008, the labor force participation
rate for women aged 55 to 64 had risen to 59%. Among women aged 65 and older, the labor
force participation rate fell from 11% in 1955 to 7.3% in 1985. Since then, the labor force
participation rate of women aged 65 and older has steadily risen, reaching 13.3% in 2008.

1 Labor force participation rates are annual averages from the monthly CPS data. They are published annually in the
January issue of the BLS publication, Employment and Earnings.
2 See Mitra Toossi, “Labor Force Projections to 2016: More Workers in Their Golden Years,” Monthly Labor Review,
vol. 130, no. 11, November 2007.
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Older Workers: Employment and Retirement Trends

Table 2. Labor Force Participation Rates, 1950 to 2008
Age Groups
Year
25 to 54
55 to 64
65 and Older
Men
1950 96.5%
86.9%
45.8%
1955 97.4
87.9
39.6
1960 97.0
86.8
33.1
1965 96.7
84.6
27.9
1970 95.8
83.0
26.8
1975 94.4
75.6
21.6
1980 94.2
72.1
19.0
1985 93.9
67.9
15.8
1990 93.4
67.8
16.3
1995 91.6
66.0
16.8
2000 91.6
67.3
17.5
2001 91.3
68.1
17.7
2002 91.0
69.2
17.8
2003 90.6
68.7
18.6
2004 90.5
68.7
19.0
2005 90.5
69.3
19.8
2006 90.6
69.6
20.3
2007 90.9
69.6
20.5
2008 90.5
70.4
21.5
Women
1950 36.8%
27.0%
9.7%
1955 39.8
32.5
10.6
1960 42.9
37.2
10.8
1965 45.2
41.1
10.0
1970 50.1
43.0
9.7
1975 55.1
40.9
8.2
1980 64.0
41.3
8.1
1985 69.6
42.0
7.3
1990 74.0
45.2
8.6
1995 75.6
49.2
8.8
2000 76.8
51.8
9.4
2001 76.4
53.0
9.7
2002 76.0
55.1
9.9
2003 75.6
56.6
10.6
2004 75.3
56.3
11.1
2005 75.3
57.0
11.5
2006 75.5
58.2
11.7
2007 75.4
58.3
12.6
2008 75.8
59.1
13.3
Source: U.S. Department of Labor, Bureau of Labor Statistics.
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Older Workers: Employment and Retirement Trends

Recent Employment Trends Among People Aged 55
and Older
Factors that influence the rate of employment among persons aged 55 and older include the state
of the job market, the availability of health insurance, eligibility for Social Security benefits, and
both the prevalence and design of employer-sponsored pensions. For example, labor force
participation among people 55 and older might increase due to the trend away from defined-
benefit pension plans that pay a guaranteed benefit for life toward defined contribution plans,
which often pay out a single lump sum at retirement. Likewise, because relatively few employers
offer retiree health insurance, some workers might choose to remain employed until they become
eligible for Medicare at age 65.
Data collected by the Census Bureau indicate that between 1990 and 2008, employment remained
generally steady among men 55 to 61 years old, and then fell in 2009 as the job market weakened
due to the recession.3 The employment rate of men aged 55 to 61 was 69.4% in March 2009,
down from 73.0% one year earlier. (See Table 3.) Employment among women aged 55 to 61
increased from 50.0% in March 1990 to 58.4% in March 2000 and 63.4% in March 2008. By
March 2009, employment among women aged 55 to 61 had fallen slightly to 62.0%, which like
the steeper decline in employment among men in this age group also was likely due to the
recession. (See Table 4).
Among both men and women aged 62 to 64, employment rates rose through the period from 1990
to 2009. Fifty-two percent of 62- to 64-year-old men were employed in March 2009, compared
with 42% in March 1990 and 47% in March 2000. Among women aged 62 to 64, employment
increased from 28% in March 1990 to 35% in March 2000 and to 41% in March 2009.
Among men 65 to 69 years old, the percentage who were employed rose from 26% in March
1990 to 30% in March 2000 and to 33% in March 2009. Employment among women aged 65 to
69 increased from 17% in March 1990 to 20% in March 2000 and to 26.5% in March 2008 before
falling slightly to 24.5% in March 2009. Among both men and women aged 70 and older, rates of
employment rose slightly between 1990 and 2009. In March 2009, 14% of men aged 70 and older
were employed, compared with 10% in 1990. Among women aged 70 and older, 8% were
employed in March 2009, compared to 5% in March 1990.
Among working women aged 55 and older and among working men aged 65 and older, the
percentage who work full-time has increased in recent years. Full-time employment has not
increased among men aged 55 to 61, but they remain more likely than other older workers to be
employed full-time. In March 2009, 90% of working men aged 55 to 61 were employed full
time, compared to 78% of working women aged 55 to 61, 80% of working men aged 62 to 64,
and 67% of working women aged 62 to 64. Fewer than half of working men and women aged 65
and older worked full time in March 2009.

3 The labor force participation rates discussed in the previous section were based on annual averages of monthly data.
The employment data in this section show employment in the week prior to the CPS interview. The March CPS files
were used for this analysis because they include detailed data about sources of income in the previous year. CRS used
information about current labor force status rather than information about labor force status in the previous year
because an individual who reported that he or she both worked and received pension income during the previous year
might have worked and received pension income consecutively rather than concurrently.
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Older Workers: Employment and Retirement Trends

Table 3. Employment of Men Aged 55 and Older, 1990 to 2009
Employed
Employment
Age
in
Population
Workers
March
(thousands)
(thousands)
Percent
Full-Time
Part-Time
55 to 61
1990 7,248 5,219
72.0
91.2
8.8
1995 7,409 5,349
72.2
89.5
10.5
2000 8,204 5,849
71.3
92.3
7.7
2005 10,554 7,666
72.6
92.1
7.9
2006 11,221 8,149
72.6
91.9
8.1
2007 11,774 8,625
73.3
91.7
8.3
2008 12,270 8,954
73.0
92.8
7.2
2009 12,482 8,661
69.4
90.0
10.0
62 to 64
1990 2,903 1,228
42.3
76.6
23.4
1995 2,681 1,159
43.2
76.6
23.4
2000 2,927 1,380
47.2
77.9
22.1
2005 3,481 1,77
51.1
79.5
20.6
2006 3,644 1,883
51.7
80.6
19.4
2007 3,696 1,822
49.3
81.3
18.7
2008 3,800 1,968
51.8
82.0
18.0
2009 4,016 2,088
52.0
79.8
20.2
65 to 69
1990 4,586 1,189
25.9
55.6
44.4
1995 4,522 1,237
27.4
57.3
42.7
2000 4,376 1,330
30.4
60.5
39.5
2005 4,814 1,428
29.7
67.5
32.5
2006 4,782 1,497
31.3
69.0
31.0
2007 5,013 1,655
33.0
70.7
29.3
2008 5,238 1,721
32.9
72.2
27.8
2009 5,632 1,878
33.3
68.6
31.4
70 and Older
1990 7,961
772
9.7
47.2
52.8
1995 8,738
989
11.3
46.5
53.5
2000 9,510 1,169
12.3
48.5
51.5
2005 10,337 1,379
13.3
50.8
49.2
2006 10,402 1,441
13.9
50.4
49.6
2007 10,430 1,508
14.5
53.1
46.9
2008 10,524 1,500
14.3
55.5
44.5
2009 10,676 1,492
14.0
54.4
45.6
Source: Congressional Research Service analysis of the Current Population Survey.
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Older Workers: Employment and Retirement Trends

Table 4. Employment of Women Aged 55 and Older, 1990 to 2009
Employed
Employment
Age
in
Population
Workers
March
(thousands)
(thousands)
Percent
Full-Time
Part-Time
55 to 61
1990 7,830 3,916
50.0
70.8
29.2
1995 7,947 4,314
54.3
74.8
25.2
2000 9,041 5,250
58.1
77.2
22.8
2005 11,650
7,086
60.8
78.9
21.1
2006 12,066
7,466
61.9
78.8
21.2
2007 12,533
7,817
62.4
79.2
20.8
2008 13,032
8,262
63.4
79.5
20.5
2009 13,304
8,242
62.0
78.2
21.8
62 to 64
1990 3,351
941
28.1
60.5
39.5
1995 3,044
968
31.8
59.5
40.5
2000 3,209 1,109
34.6
61.4
38.6
2005 3,834 1,401
36.5
67.2
32.8
2006 4,038 1,661
41.1
68.7
32.3
2007 4,179 1,746
41.8
68.5
31.5
2008 4,189 1,736
41.4
65.3
34.7
2009 4,476 1,835
41.0
66.7
33.3
65 to 69
1990 5,537
920
16.6
43.6
56.4
1995 5,224
865
16.6
42.7
57.3
2000 4,976
983
19.7
44.2
55.8
2005 5,311 1,193
22.5
51.4
48.6
2006 5,449 1,247
22.9
52.7
47.3
2007 5,616 1,438
25.6
54.0
46.0
2008 5,927 1,570
26.5
55.3
44.7
2009 6,193 1,520
24.5
53.6
46.4
70 and Older
1990 12,000
600
5.0
32.8
67.2
1995 13,174
681
5.2
29.8
70.2
2000 13,759
816
5.9
36.3
63.7
2005 14,752
1,041
7.1
37.1
62.9
2006 14,872
993
6.7
38.8
61.2
2007 14,977
1,160
7.8
40.0
60.0
2008 15,100
1,135
7.5
40.9
59.1
2009 15,286
1,206
7.9
38.6
61.4
Source: Congressional Research Service analysis of the Current Population Survey.
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Retirement Income Among Older Workers
An important consideration for workers contemplating retirement is whether their future income
will be adequate to maintain their standard of living. Table 5 shows the proportion of men and
women aged 55 and older who reported on the CPS that they received pension income of some
kind during the calendar year prior to the survey. In this table, “pension income” includes
employer-sponsored pensions (including military retirement), veterans’ pensions, and periodic
payments from annuities, insurance policies, individual retirement accounts, 401(k) accounts, and
Keogh plans for the self-employed.4 The proportion of men and women who receive income
from a pension or other retirement plan increases with age. In 2008, only 16% of men aged 55 to
64 received income from a pension or other retirement plan. Among those aged 65 or older, 42%
had income from pensions or retirement savings plans in 2008. The patterns among women were
similar: only 12% of 55- to 64-year-old women received income from pensions or retirement
savings plans in 2008, whereas 29% of those aged 65 or older received such income.
The 16% of men aged 55 to 64 who were receiving pension income in 2008 represents a decline
from 23% who received such income in 1990. Over the same period, the proportion of men aged
65 or older receiving pension income also fell, declining from 49% in 1990 to 42% in 2008. The
proportion of women aged 55 to 64 with pension income remained relatively stable at 11% to
12% throughout this period. Among women aged 65 and older, 29% received income from
pensions and retirement savings plans in 2008, little changed from 28% in 1990 and 29% in 2000.
To study the relationship between employment rates and receipt of pension income, we grouped
men and women into two age categories, 55 to 64 and 65 and older, and calculated the correlation
coefficient between the percentage who were employed and the percentage who received pension
income. Among men, there is a negative correlation between receipt of pension income and
employment. Over the period from 1994 to 2008, the correlation between current employment
and receipt of pension income was -0.72 for men 55 to 64 years old and -0.87 for men 65 and
older. One possible explanation for this negative correlation is that each year a smaller percentage
of workers are covered by defined benefit plans, which often have generous early retirement
subsidies and pay a monthly benefit that is guaranteed for life. Workers whose main retirement
plan is a defined contribution plan (such as a 401(k)) might be choosing to delay retirement in
order to build up larger account balances or to make up for past investment losses.
Among women, the percentage who were employed and the percentage who received pension
income were not strongly correlated over the period from 1994 to 2008 (0.04 for women aged 55-
64 and 0.27 for women 65 and older). This is partly due to the fact that the rate of labor force
participation among women under age 65 has been rising steadily over many years. Thus, one
reason that the percentage of all women 55 and older who receive pension income has not fallen
along with that of men is that an increasing percentage of women have earned retirement benefits
through their own employment. This could mask a decline in the percentage of working women
who are (or will be) eligible to receive pension distributions.

4 Lump-sum distributions from employer-sponsored retirement plans are not counted as income on the CPS. To the
extent that individuals take lump-sum distributions from these plans and deposit the funds into non-retirement accounts
from which they make withdrawals to supplement their income, the CPS underestimates retirement income.
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Table 5. Receipt of Income from Employer Pensions and Retirement Savings Plans
(in thousands)

Individuals 55 to 64 Years Old
Individuals Aged 65 and Older
Number of
Number of
Number of
Number of

People
Recipients
Percentage
People
Recipients
Percentage
Men

1990 10,152 2,368
23.3
12,547
6,178
49.2
1995 10,090 2,279
22.6
13,260
6,206
46.8
2000 11,249 2,124
18.9
14,179
6,099
43.0
2001 12,366 2,371
19.2
14,235
6,276
44.1
2002 13,149 2,372
18.0
14,527
6,414
44.2
2003 13,531 2,450
18.1
14,797
6,656
45.0
2004 14,034 2,578
18.4
15,151
6,778
44.7
2005 14,865 2,709
18.2
15,185
6,539
43.1
2006 15,469 2,692
17.4
15,443
6,739
43.6
2007 16,069 2,677
16.7
15,762
6,552
41.6
2008 16,499 2,672
16.2
16,308
6,915
42.4
Women

1990 11,182 1,479
13.2
17,538
4,962
28.3
1995 10,991 1,164
10.6
18,398
5,025
27.3
2000 12,532 1,475
11.8
18,799
5,426
28.9
2001 13,501 1,525
11.3
19,535
5,412
27.7
2002 14,229 1,572
11.0
19,706
5,379
27.3
2003 14,824 1,705
11.5
19,862
5,610
28.2
2004 15,484 1,776
11.5
20,063
5,603
27.9
2005 16,104 1,959
12.2
20,320
5,901
29.0
2006 16,712 1,940
11.6
20,593
5,786
28.1
2007 17,220 1,883
10.9
21,027
5,840
27.8
2008 17,780 2,062
11.6
21,480
6,224
29.0
Source: Congressional Research Service analysis of the Current Population Survey.
Notes: Retirement plans may include a traditional pension, a retirement savings plan, or both. The year shown is
the year when the income was received, which is the calendar year preceding the March CPS interview.
Employment Among Recipients of Retirement
Income
The data displayed in Table 5 show the number and percentage of people aged 55 and older who
received pension income or took distributions from retirement accounts. The data in Table 6
show that among men aged 55 to 64 who received pension income in 2008, 37.2% were
employed full or part time in March 2009. Relatively few men aged 65 or older who received
income from pensions engaged in paid employment: only 10% to 13% were employed, on
average, at any point during the period shown in the table. Women who received pension income
were less likely than men to be employed. Among women 55 to 64 years old who received
income from a pension or retirement savings plan in 2008, 32.2% were employed in March 2009.
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Among women aged 65 or older who received income from a pension or retirement savings plan,
only 6% to 9%, on average, were employed at any time during the period from 1990 to 2008.
Table 6. Employment of Recipients of Pension Income
(in thousands)

Recipients, Aged 55 to 64
Recipients, Aged 65 and Older
Number of
Number
Percentage
Number of
Number
Percentage

Recipients
Employed
Employed
Recipients
Employed
Employed
Men

1990 2,368
879 37.1
6,178
643 10.4
1995 2,279
831 36.5
6,206
726 11.7
2000 2,124
797 37.5
6,099
721 11.8
2001 2,371
907 38.3
6,276
739 11.8
2002 2,372
827 34.9
6,414
745 11.6
2003 2,450
959 39.1
6,656
839 12.6
2004 2,578
982 38.1
6,778
836 12.3
2005 2,709
1,081 39.9
6,539
771 11.8
2006 2,692
1,102 40.9
6,739
846 12.6
2007 2,677
1,000 37.4
6,552
799 12.2
2008 2,672
993 37.2
6,915
915 13.2
Women

1990 1,479
392 26.5
4,962
345 7.0
1995 1,164
324 27.9
5,025
281 5.6
2000 1,475
488 33.1
5,426
436 8.0
2001 1,525
439 28.8
5,412
393 7.3
2002 1,572
530 33.7
5,379
425 8.0
2003 1,705
560 32.9
5,610
454 8.1
2004 1,776
553 31.1
5,603
416 7.4
2005 1,959
675 34.5
5,901
457 7.7
2006 1,940
682 35.2
5,786
504 8.7
2007 1,883
662 35.1
5,840
528 9.0
2008 2,062
665 32.2
6,224
554 8.9
Source: Congressional Research Service analysis of the Current Population Survey.
Note: Retirement plans may include a traditional pension, a retirement savings plan, or both. The income year is
the year prior to the survey. Employment is in current year.
Social Security Retirement Benefits
Age When Benefits Begin
As a result of the Social Security Amendments of 1983 (P.L. 98-21), the Social Security full
retirement age is increasing from 65 to 67 incrementally over a 22-year period from 1998 to
2020. For individuals who were born in 1944 – who will turn 65 in 2009 – the full retirement age
under Social Security is 66. Social Security retired-worker benefits are first available at age 62,
but benefits that begin before the full retirement age are permanently reduced. In 2009, a worker
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who begins receiving Social Security at age 62 will have his or her benefit permanently reduced
by 25% below the amount that would be payable at the full retirement age. When the full
retirement age reaches 67 in 2020, the benefit payable at 62 will be 30% less than the amount that
would be paid if retired worker benefits were claimed at age 67.
Most people choose to begin receiving Social Security retirement benefits before age 65. The data
presented in Table 7 show that 68% of men and 73% of women who began receiving Social
Security retired-worker benefits in 2007 applied for benefits before age 65. In 2000, a higher-
than-average percentage of new benefits were awarded to persons 65 and older. This was mainly
attributable to the repeal of the Social Security earnings test for workers who are at or above the
Social Security normal retirement age. Prior to 2000, the earnings test reduced the Social Security
benefits of recipients under age 70 whose earnings exceeded specific thresholds. P.L. 106-182
eliminated the earnings test for people at the full retirement age or older, effective January 1,
2000.5 The earnings test now applies only to beneficiaries who are under the full retirement age.
With the repeal of the earnings test for people aged 65 and older, workers who had deferred
receipt of Social Security because their earnings would have resulted in a benefit reduction had an
incentive to apply for benefits. Workers who delay receipt of benefits until they are beyond the
full retirement age remain eligible for the delayed retirement credit, which permanently increases
their benefits. This provides a financial incentive for workers to remain employed and defer
receipt of Social Security.
Since 2002, the percentage of male applicants for Social Security retired worker benefits who are
under age 65 has fallen from 77% to 68%. Over the same period, the percentage of female
applicants for Social Security retired worker benefits who are under age 65 fell from 81% to 73%.
Simultaneously the percentage of male applicants for retired worker benefits who were 65 years
old in they year that they applied rose from 20% to 29% and the percentage of female applicants
who were 65 years old when they applied rose from 14% to 21%. This trend may be due in part
to the incremental increase in the full retirement age to 66, which began in 2000. Other causes of
delaying claims for Social Security retired worker benefits could be the increasing percentage of
workers whose only retirement plan is a 401(k) or other defined contribution plan. People with
these kinds of plans have been shown to delay retirement to add to their account balances. Also,
since few employers provide health insurance to retirees, some workers may be delaying
retirement until they are eligible for Medicare at 65.

5 In 2009, a Social Security recipient under the full retirement age can earn up to $14,160 without a benefit reduction.
Benefits are cut by $1 for each $2 earned over that amount.
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Table 7. Social Security Retired Worker Benefit Awards, by Age
(Age in Year When Retired Worker Benefits Began)

62 to 64
65
Over 65
Percentage of
Percentage of
Percentage of
Awards
All Awards
Awards
All Awards
Awards
All Awards
Men

1990 637,100
74.4
158,300
18.5
60,800
7.1
1995 614,700
76.1
144,400
17.9
48,700
6.0
2000a 637,000
64.5
226,000
22.9
124,800
12.6
2001 650,000
75.1
179,000
20.7
36,700
4.2
2002 673,000
76.9
171,600
19.6
30,300
3.5
2003 653,300
76.4
173,300
20.2
28,900
3.4
2004 671,700
75.1
188,600
21.1
34,500
3.8
2005 693,000
73.3
210,800
22.3
41,700
4.4
2006 659,300
71.0
236,700
25.5
32,600
3.5
2007 635,700
67.6
268,600
28.6
36,300
3.9
Women

1990 494,800
80.0
85,900
13.9
37,700
6.1
1995 492,900
79.9
87,800
14.2
36,300
5.9
2000a 574,700
74.5
118,700
15.4
77,700
10.1
2001 556,200
78.5
102,000
14.4
50,100
7.1
2002 581,700
80.7
103,500
14.4
35,400
4.9
2003 582,400
78.9
111,000
15.1
44,300
6.0
2004 615,100
80.3
124,400
16.2
26,700
3.5
2005 649,800
76.6
143,400
16.9
55,000
6.5
2006 631,900
74.9
158,900
18.8
52,400
6.2
2007 623,900
73.1
181,800
21.3
48,100
5.6
Source: Annual Statistical Supplement to the Social Security Bul etin, various years.
Note: Initial awards exclude conversions from disabled worker to retired worker benefits.
a. The earnings test was repealed in 2000 for workers above the Social Security full retirement age.
Retired Worker Beneficiaries as a Percentage of Each Age Category
The data presented in Table 8 show that in 2007, 33% of men aged 62 to 64 were receiving
Social Security retired worker benefits. This was 12 percentage points lower than in 1990 and 10
percentage points lower than in 2000. The decline coincided with rising employment rates
among men in this age group. (See Table 4.) Among women, the percentage of 62- to 64-year-
olds who were receiving Social Security retired worker benefits was generally stable at about
36% over the period from 1990 to 2000, but by 2007, the percentage of 62 to 64 year-old women
receiving retired worker benefits had fallen to 31.1%. The decline in the percentage of 62- to 64-
year-old men and women receiving Social Security benefits could have several causes, including
the move away from defined benefit plans to defined contribution plans in the private sector and
the desire among workers under age 65 to remain covered under an employer-sponsored health
insurance plan until they become eligible to participate in Medicare at age 65.
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Among men aged 65 to 69, the proportion who were receiving Social Security retired worker
benefits rose from 83% in 1995 to 90% in 2000. By 2007, the percentage of 65 to 69 year-old
men receiving retired worker benefits had fallen to 83%. Ninety-two percent of men aged 70 and
older received Social Security retired worker benefits in 2007, slightly more than the 90% who
received retired worker benefits in 2000, but essentially the same as the percentage of men in this
age group who received retired worker benefits in 1990.
Among women aged 65 to 69, the proportion who were receiving Social Security retired worker
benefits increased from 56% in 1990 to 61% in 2000 and to 65% in 2007. This trend is consistent
with the long-term increase in the proportion of women who are eligible for Social Security
benefits based on their own earnings histories rather than as the spouses of retired workers.
Likewise, the percentage of women aged 70 and older who were receiving Social Security retired
worker benefits rose from 56% in 1990 to 59% in 2000 and to 63% in 2007.
Table 8. Social Security Retired Worker Beneficiaries, by Age
62
to
64 65 to 69
70 and Over
Number
Percentage
Number
Percentage
Number
Percentage

(thousands)
Of Age Group
(thousands)
Of Age Group
(thousands)
Of Age Group
Men

1990
1,336 45.3
3,898
83.8
7,751 91.7
1995
1,320 46.8
3,900
83.4
8,694 91.2
2000
1,330 43.2
4,076
90.3
9,366 90.4
2001
1,333 41.8
4,125
90.9
9,473 90.8
2002
1,333 40.4
4,198
91.0
9,578 91.1
2003
1,331 38.2
4,255
89.7
9,667 90.7
2004
1,373 38.1
4,270
88.0
9,796 90.7
2005
1,430 38.6
4,289
86.2
9,935 91.0
2006
1,424 36.4
4,357
84.8
10,087 91.5
2007
1,364 32.8
4,472
83.0
10,275 92.2
Women

1990
1,167 35.9
3,067
55.6
7,607 55.9
1995
1,128 36.8
3,058
56.7
8,570 57.7
2000
1,223 36.0
3,209
61.1
9,302 58.7
2001
1,237 35.3
3,284
62.4
9,390 59.1
2002
1,246 34.4
3,369
63.2
9,480 59.6
2003
1,256 33.5
3,475
65.1
9,563 60.2
2004
1,313 33.9
3,544
65.1
9,677 60.5
2005
1,394 35.1
3,621
65.1
9,806 61.2
2006
1,416 33.8
3,742
65.2
9,949 62.0
2007
1,380 31.1
3,904
65.1
10,132 63.1
Source: Annual Statistical Supplement to the Social Security Bul etin, various years.
Older Workers and “Phased Retirement”
In the traditional view of retirement, a worker moves from full-time employment to complete
withdrawal from the labor force in a single step. In fact, however, many workers choose to
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continue working after they have retired from their “career” jobs. The process of retiring often
occurs gradually over several years, with some workers retiring from year-round, full-time
employment and moving to part-time or part-year work at another firm, often in a different
occupation. The data in Table 6, for example, show that 37% of men and 32% of women aged 55
to 64 who received income from a pension in 2008 were employed in March 2009.
As members of the baby-boom generation begin to retire, millions of skilled and experienced
workers will exit the labor force. As this occurs, employers may find it necessary to alter their
employment practices and pension plans to induce some of those who would otherwise retire to
remain on the job, perhaps on a part-time or part-year schedule. This process is sometimes
referred to as phased retirement. No statutory definition of phased retirement exists, but one
analyst has described it as “the situation in which an older individual is actively working for an
employer part time or [on] an otherwise reduced schedule as a transition into full retirement. [It]
may also include situations in which older employees receive some or all of their retirement
benefits while still employed.”6
Current Approaches to Phased Retirement
Employers have devised a number of strategies to retain the services of employees who are
eligible to retire. Some firms allow retirement-eligible employees to work fewer days per week or
fewer hours per day. Some also permit employees to reduce their workload through job-sharing.
Firms sometimes rehire retired employees on a part-time or temporary basis, or bring them back
as contractors or consultants rather than as regular employees.
Phased Retirement and Pension Distributions
In order to qualify for the favorable tax status granted to tax-qualified pensions, a retirement plan
may pay benefits only on condition of the participant’s death, disability, or separation from
employment, termination of the plan, or at the earlier of age 62 or the plan’s normal retirement
age.7 Prior to enactment of the Pension Protection Act of 2006 (PPA, P.L. 109-280), an employee
could take distributions from a defined benefit pension only after having separated from the
employer or having reached the pension plan’s normal retirement age, which by law cannot be
greater than 65. Section 905 of the PPA amended the Employee Retirement Income Security Act
of 1974 (ERISA) such that distributions from a qualified retirement plan to an employee who has
not separated from the employer can begin at age 62, even if this is younger than the plan’s
normal retirement age.
An employee who has reached age 62 or the pension plan’s normal retirement age can begin to
receive distributions from the plan, even if he or she continues to be employed by the firm.8
Likewise, an employee who has reached the plan’s early retirement age can begin to receive
distributions from the plan upon separation from the firm. If a participant has separated from the
employer and has begun receiving pension distributions plan, he or she can continue to receive

6 Testimony of Wilma K. Schopp on behalf of the Association of Private Pension and Welfare Plans before the U.S.
Senate Special Committee on Aging, April 3, 2000.
7 26 C.F.R. § 1.401-1(b)(1)(i).
8 If a plan participant continues to work for an employer beyond the plan’s normal retirement age, the plan must meet
the statutory requirements for continued benefit accruals under 26 U.S.C. § 411(b)(1)(H).
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these distributions even if the participant becomes re-employed by the plan sponsor; however, the
employer may be required to demonstrate to the Internal Revenue Service that “both a bona fide
retirement (or other termination of employment) and a legitimate rehire have occurred.”9
One way that a firm could offer phased retirement to more workers would be to lower the plan’s
normal retirement age. For example, the firm could reduce the normal retirement age to an age
between 55 and 62. From the employer’s point of view, there would be at least two potential
drawbacks to such an approach. First, it could result in an unintended exodus of workers into
retirement. Second, it could increase the cost of funding the plan because full benefits would be
payable at a younger age.
Rather than reduce the normal retirement age in their pension plans, some employers would
prefer that Congress amend the Internal Revenue Code to allow in-service pension distributions
to employees who have reached the plan’s early retirement age.10 Some observers believe,
however, that this would be contrary to the main purpose of pension plans, which is to replace
wage income after a worker has retired. To the extent that employers are permitted to pay pension
benefits to individuals still engaged in gainful employment, pension income is a taxpayer-
subsidized supplement to wages. Permitting in-service distributions to current employees who
have not reached age 62 or the plan’s normal retirement age would allow employers to
compensate current employees partly with pension income, effectively reducing their operating
expenses by shifting some costs to the pension fund.
Amending the Internal Revenue Code to permit in-service distributions at the early retirement age
would alter incentives to work or retire, as well as how much to work and for whom to work.
Consequently, it would affect both labor force participation and hours worked among older
employees. The net effect of the changes in labor force participation and hours worked cannot be
predicted. Some workers who otherwise would have retired before the plan’s normal retirement
age would choose instead to continue working for their current employer on a reduced schedule.
This would tend to increase labor force participation and hours worked. Other workers who
would have taken early retirement and then sought other employment might choose instead to
remain with their current employer on a reduced schedule. The effect of this change in behavior
on hours worked might be close to neutral, depending on the wages available from alternative
employment and the income received from pension distributions. Finally, some employees who
otherwise would have chosen to continue working full-time until reaching the plan’s normal
retirement age might instead reduce their work schedule and supplement their earnings with
pension income. This would tend to reduce total hours worked.
Distributions from 401(k) Plans
In-service distributions from defined contribution plans that occur before the participant reaches
age 59½ are subject to a 10% tax penalty in addition to ordinary income taxes. Distributions may
begin earlier if the employee separates from his or her employer at age 55 or older. Some
advocates of phased retirement arrangements have suggested that the minimum age for in-service
distributions from defined contribution plans should be lowered from 59½ to 55.11 The effect on

9 Vivian Fields and Robert Hutchens, “Regulatory Obstacles to Phased Retirement in the For-Profit Sector” Benefits
Quarterly, volume 18 (3), Third Quarter 2002.
10 Requirements for qualification of pension plans are defined at 26 U.S.C. § 401(a).
11 It might also seem reasonable that if legislation were passed to allow in-service distributions from an employer’s
(continued...)
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labor force participation of such a change in tax policy would likely be very similar to the effect
of allowing in-service distributions from a defined benefit plan at the plan’s early retirement age.
Some workers who might have fully retired from the labor force earlier than age 59½ so that they
could begin taking distributions from the plan would be induced to work longer. Others who
would have taken early retirement and then sought work elsewhere would remain with their
current employers, because they would be able to combine wages from part-time work with
distributions from the retirement plan. Finally, some employees who otherwise would have
chosen to continue working full-time until age 59½ or later would reduce their work schedules
and supplement their earnings with distributions from the retirement plan.
Author Contact Information

Patrick Purcell

Specialist in Income Security
ppurcell@crs.loc.gov, 7-7571

(...continued)
defined benefit plan at the plan’s early retirement age, then distributions from the employer’s defined contribution plan
should be permitted at the same age (perhaps with a lower limit of 55). However, such a policy would suffer from at
least two drawbacks. First, the minimum age for in-service distributions from defined contribution plans, which is now
the same for all such plans, would differ from firm to firm, thus making the retirement planning process even more
confusing for workers and their families. Second, it would be administratively difficult—and in some cases, perhaps,
impossible—to tie the minimum age for in-service distributions in the defined contribution plan to the early retirement
age specified in the employer’s defined benefit plan.
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