Looking ahead

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Many of the demographic and labor market trends that will shape the lifestyles and housing choices of tomorrow's seniors are already of work.

Since those who will make up the senior population in

2030 are now alive, it is possible to speculate how some of these factorsincluding increased longevity, better lifelong health, and greater wealth-will affect the demand for housing and support services. If history is any guide, however, the baby boomers will put their unique stamp on markets in the 21 st century, just as they have for the past 30 years.

Improved Health

Two major revolutions have affected the health of the elderly. The first is wellknown: life expectancies are much longer today than they were a century ago. Instead of living to age 50, Americans can now expect to reach age 75. Indeed, roughly three-quarters of the people who have ever attained that age are now living. Extended longevity is attributable to better hygiene, nutrition, and disease prevention throughout life.

The other revolution-improvement in lifelong health-is only now unfolding. Today's elderly are not experiencing the same incidence of diseases traditionally associated with aging. The disability rate for persons age 65 or older dropped by 14 percent between 1984 and 1994, thanks largely to regular exercise, better diet, better medical care, and greater emphasis on preventive medicine. Medical innovation has also made tremendous progress in reducing the incidence and managing the impact of many age-related diseases, such as heart failure. Every sign points to further progress in preventing and treating heart disease, Alzheimer's, cancer, and other serious illnesses.

Healthy aging will have a dramatic impact on the lives that seniors can and will enjoy, as well as on the cost of medical care. Healthy seniors live longer; the older people are when they die, the less costly the medical care they require. With sickness and disability reduced to a minimum, Medicare is likely to shift from just offering care to providing preventive medicine for the elderly.

Living Longer With Spouses

While the common view is that women will continue to make up a disproportionate share of the senior population, recent trends suggest that men are closing the longevity gap. During the 1970s, the growth rate in the number of men over age 75 lagged that of same-age women (2.1 percent annually compared with 3.9 percent). In the early 1980s, though, the populations of elderly men and women grew at close to the same rate. Then, between 1984 and 1994, the growth rate of elderly men actually overtook that of elderly women (3.1 percent annually compared with 2.7 percent). This transition is most striking for the group about to reach age 75 (Figure 15).

The effect of these differential growth rates is apparent in the changing ratio of men to women over age 75. Although the annual changes are small, they are likely to have a significant impact over time. Based on census projections, the ratio of elderly males to females is expected to climb from 0.56 in 1994 to 0.76 in 2030.

The presence of a spouse is critical to the ability of seniors to remain at home. One study estimates that living with a spouse cuts the probability of entering a nursing home or some similar setting by half The increasing longevity of men thus heralds more elderly living in their own homes for longer periods of time, and less demand for assisted living communities and nursing homes than would otherwise be expected.

Higher Education Levels

Like health and longevity, the educational achievement of Americans has improved dramatically. The share with a high school education more than tripled from just 25 percent in 1940 to 82.8 percent in 1998, with about one-quarter also having graduated from a four-year college program.

Since the people who will turn 70 to 74 years old between now and 2030 are unlikely to pursue further schooling to any meaningful degree, it is possible to project their education levels over the next 30 years. In the early 1990s, approximately 13 percent of this age group held a bachelor's degree. By 2020, the share should approach 30 percent before falling off with the aging of less well-educated immigrants.

This projection in fact understates future education levels among the elderly, because less well-educated persons tend to die at an earlier age (probably reflecting lifetime exposure to more health risks and poorer care). For example, 10.6 percent of people ages 70 to 74 in 1990 held a bachelor's degree; by 1998, 13.0 percent of this same group (then ages 78 to 82) reported having a degree.

Higher levels of education among seniors are likely to mean more demand for high-quality health care and other support services. In addition, tomorrow's more highly educated elderly may well have an even stronger desire to live independently than today's.

Longer Work Life

Greater educational attainment translates into higher labor force participation rates. In 1997, people with less than a high school education had a 61.7 percent participation rate, while those who had graduated from high school had an 82.5 percent participation rate. The rate increases to 83.7 percent for those with some college, and to 88.5 percent for college graduates.

The effect is already evident among men over age 65, whose labor force participation rate edged up from 16.3 percent in 1991 to 17.1 percent in 1997. (The change in rates for women is influenced by other factors, mainly the expansion of work opportunities.) Approximately 20 percent of men ages 70 to 74 were working in 1993.

Better-educated seniors may prefer to spend some of their time working, either in part-time positions or in so-called "bridge jobs" that fill the time between the end of their primary career and complete retirement. The role of part-time work and of self-employment increases with age, starting in the early 60s. Nonfinancial factorssuch as self-esteem, social contact, a feeling of being a productive part of society, and a desire to keep up with innovation-also encourage people to keep working past the traditional retirement age.

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Growth in the Number of 70- to 74-Year-Old Men Is Outpacing That of Same-Age Women

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Tomorrow's Seniors Will Be Boner

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The mandatory retirement age of 65 was raised to 70 in 1978 and later eliminated altogether for firms with at least 20 employees. Work disincentives have also been disappearing from private pension plans, especially defined-contribution plans, such as the 401(k). Moreover, changes in the Social Security laws have made work relatively more attractive for retirees, including an increase in the amount of permitted earnings from $13,500 in 1997 to $30,000 in 2002.

Further policy changes are likely to increase the incentives for the baby boomers to remain in the labor force to support their generation's demands on the social welfare system. Improved health makes it both possible and likely that seniors will be increasingly active in the labor force over the next 30 years.

Greater Financal Resources

In 1970, about one-quarter of Americans age 65 or over lived in poverty. Today, the share is one-tenth. Seniors are far better off financially than their predecessors largely because of Social Security, public employee pension plans, and private corporate pension plans.

The mean net worth of households ages 65 to 74 has climbed sharply over the past three decades, up from $165,000 in 1962 to $346,000 in 1995 (Figure 16B). These figures underestimate wealth, because they exclude some important elements, such as the future contribution of Social Security and some types of pension plans.

There is reason to believe that tomorrow's seniors will be even better off. Along with the benefits of Social Security, the baby boomers retiring between 2010 and 2035 will be able to draw on large private pension funds, including individual retirement accounts (IRAs) and defined-contribution plans such as the 401(k). From just 1980 to 1997, public and private pension plan funds soared from $873 billion to nearly $7 trillion (Figure 17). Indeed, it is likely that the contribution of funds from 401(k) plans to retirement support will exceed that of Social Security by 2025.

Fewer Children for Support

The availability of children to help provide care plays an important role in the choice of living arrangements for seniors. Today's elderly have fairly large families to draw upon for support in their declining years. Approximately half of women who are now ages 70 to 74 have at least three children, and this share should rise over the next five years to just under 60 percent.

Given that the baby boomers have much smaller families, they will face a very different set of family resources. The share of women ages 70 to 74 with three or more children is projected to decline to just under 30 percent by 2030 (Figure 16C). As a result, living arrangements such as shared housing, which typically involves a senior living with an adult child, may become less common. At the same time, the lack of children living nearby will boost demand for such alternatives as assisted communities, unassisted communities, and supported housing.

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Contributions to Public and Private Pension Foods Are Soaring