The generally strong U.S. economy of the last several years has resulted in income gains for most working Americans, but those over 65 seem to be benefiting the least, according to a report issued in September by the U.S. Census Bureau. Between 2015 and 2016 real median household income rose 3.2 percent overall, according to the bureau. However, households with people over age 65 saw their incomes rise by only 2.1 percent. By contrast, households of those under 65 reported gains of 3.7 percent.
Of course, many people over 65 are no longer in the workforce and in line for annual raises. Instead, they’re living on so-called “fixed” incomes, consisting of Social Security and, for some lucky retirees, traditional employer or union pensions. While Social Security recipients receive cost-of-living adjustments (COLAs) most years, these tend to be modest at best, especially in times of low inflation. For example, in 2018 the COLA will be 2 percent, while In 2017 it was just 0.3 percent.
Nevertheless, a strong economy may have other benefits for seniors.
A Better Job Market
Seniors who are currently in the workforce may find it easier to keep their jobs in a growing economy with relatively low unemployment. Retirees hoping to return to the workforce, either full or part time, should have an easier go of it, as well.
Employment among Americans age 65 and over has risen steadily in recent years, despite taking a dip during the Great Recession of 2007-2009. In fact, older workers have seen more job growth than their younger counterparts. A 2016 analysis by the Pew Research Center reported that this held true for “65- to 69-year-olds, 70- to 74-year-olds, and those 75 and older. All are working at higher rates than they did in May 2008, the only age groups about which that can be said.”
Continuing to work offers another potential plus for seniors: They may be able to put off collecting Social Security benefits. While recipients can start taking benefits as early as age 62, those benefits will be permanently reduced. Their full benefits are available only if they wait until their “normal” retirement age, which is 66 for anyone born between 1943 and 1954, 66 and varying additional months for those born between 1955 and 1959, and 67 for those born in 1960 or later. Plus, they can boost their eventual benefits by another 8 percent for each year they delay past normal retirement age, up to age 70.
A Rising Stock Market
Seniors with money invested in stocks, either directly in individual stocks or indirectly through mutual funds in their IRAs or 401(k) plans, benefit in several ways when the stock market rises. Not only are their accounts worth more on paper; if they are making regular, systematic withdrawals their money is likely to last longer. They may also be able to leave larger inheritances, if that’s a consideration.
For example, retirees who follow a common version of the “4 percent rule” will typically withdraw an amount equal to 4 percent of their savings in their first year of retirement, followed by that dollar amount, plus an adjustment for inflation, in subsequent years. They may actually see their portfolio rise in value if the stock market consistently returns more than they’re withdrawing, as it can in good times. For 2016, for example, the S&P 500 stock index rose 9.75 percent. Of course, the stock market can go in the other direction, too, which is one reason for following a disciplined withdrawal strategy, such as the 4 percent rule, and not going crazy just because the market is hot.
A Solid Real Estate Market
Seniors who own their homes benefit from the wage gains of younger workers, more of whom will be able to buy homes—and pay higher prices for them. Between 2015 and 2016, for example, the average home price rose 11 percent, according to Realtor.com. A strong economy also means that homeowners who’ve decided the time has come to sell are likely to find potential buyers more quickly.
Rising home prices can also benefit seniors who are interested in borrowing against their home equity through a reverse mortgage. Available only to homeowners age 62 and older, a reverse mortgage allows you to tap a percentage of your equity without having to sell the home and move out. The more your home’s value rises, the more equity you’ll have and the more cash you should have access to if you ever need it.