For many reasons, we have been looking at the sources of income for households ages 62-75, a group eligible for Social Security, many of whom could be presumed to be retired.
Here are the numbers for all households in which the head is 62-75, grouped by income level. While earnings as a percentage of total income stayed virtually constant for low-income households, earnings increased by 10 percentage points for those in the middle group and by 13 percentage points for high-income households . In the case of the high-income group, earnings now account for more than half of all income.
Perhaps, this pattern should not be so surprising, given that: 1) 401s only started in the 1980s; 2) only recent retirees will have been able to spend their whole career covered by a 401 plan; and 3) participants are not required to start drawing down their accumulated balances until their early 70s.
The third point that emerges from these data is that the income distribution for these older households has become more unequal . High-income households’ average income in 2019 was 2.8 times the 1995 level, whereas the ratios for low- and middle-income households were 2.3 and 2.4, respectively. The big difference is earnings. The word has gotten out that working longer is the key to a secure retirement, and those with the most education and resources have changed their behavior.