Hessam Bavafa is the Wisconsin School of Business Bascom Professor and Professor of Operations and Information Management at the University of Wisconsin-Madison. Anita Mukherjee is the Richard G. and Julie J. Diermeier Professor in Business and Associate Professor in the Wisconsin School of Business at the University of Wisconsin-Madison. Tyler Q. Welch is an Assistant Professor in the Department of Risk, Actuarial Science, Healthcare Management, and Legal Studies in the Fox School of Business at Temple University.
Longer Lives, Unequal Retirements: How Wealth Shapes Health and Work after 65
Americans are living and working longer, but the additional years are not experienced equally. A longer life can mean more years of good health, more time in retirement, and the freedom to continue working by choice. It can also mean more years coping with disability or remaining at work because retirement is financially out of reach.
Our recent study examines how wealth shapes these different experiences of later life. Rather than looking only at how long people live, we ask how those years are divided between good health and disability, and between paid work and life outside the workforce.
Using the nationally representative Health and Retirement Study, we compare Americans who reached age 65 in 1996 with those who reached that age in 2006. We group individuals into four wealth categories and estimate three related measures: total life expectancy, disability-free life expectancy, and work-free life expectancy. The last two measures capture how many years after age 65 a person can expect to live without a disability and without participating in paid work. Building on our prior work, this new study for the Pension Research Council also examines subjective beliefs about these outcomes.
The wealth divide is clear, and it drives more than just longevity.
The results show a striking wealth gradient in the quality of later life. Among people reaching age 65 in 1996, those in the lowest wealth group could expect to live about 11 years without disability. Those in the highest wealth group could expect more than 18 disability-free years, a difference of over seven years.
We find a similar pattern for work-free life. People in the highest wealth group worked more years after age 65 than those with the least wealth. Yet, they also enjoyed substantially more years without paid work. In the 1996 cohort, the lowest-wealth group could expect about 13.4 work-free years after age 65, compared with approximately 18.3 years for the wealthiest group.
This apparent paradox is important. Working longer does not necessarily indicate retirement insecurity. For wealthier adults, longer careers can reflect good health, rewarding jobs, and contributions to retirement accounts during the highest-earning years (including higher earnings for Social Security retirement benefit calculations). Put simply, they can work more while still expecting a longer, healthier retirement.
For people with fewer financial resources, the situation is different. They tend to have shorter lives and fewer healthy years. Although financial need may give them a strong reason to remain employed, disability can restrict their ability to do so. Their retirement challenge is therefore twofold: they have fewer resources with which to retire, but they may also have less physical capacity to continue working.
This divide has also grown over time.
Comparing the 1996 and 2006 cohorts shows that these inequalities became more pronounced. Among lower-wealth adults, healthy life expectancy stagnated, while the number of years lived with disability increased. Wealthier adults, by contrast, gained additional healthy years. They were increasingly able to work longer while preserving substantially more time for a healthy, work-free retirement.
These findings complicate assumptions that broad increases in longevity make longer working lives equally feasible for everyone. Raising retirement ages or encouraging people to delay retirement may be manageable for healthy professionals with flexible jobs but impose burdens on workers who enter later ages with poorer health, physically demanding jobs, and limited savings.
Do people anticipate these differences?
We also compare observed outcomes with people’s expectations about their longevity, health, and likelihood of working after age 65. People generally recognize that wealthier adults are more likely to live longer. Yet their expectations do not fully capture how these patterns are changing.
In particular, lower-wealth adults did not anticipate the worsening disability patterns observed in the data. Expectations about working after age 65 were also misaligned with actual changes: the least wealthy expected their chances of working full-time to fall, even though later-life work increased across the wealth distribution.
Such gaps matter because retirement decisions depend on beliefs about how long people will live, how healthy they will be, and how long they can continue earning. Misjudging any of these can affect saving, benefit claiming, insurance choices, and plans for leaving the workforce.
Why do these findings matter?
Retirement security cannot be measured by account balances or total life expectancy alone. It also depends on whether people reach older ages healthy enough to work and, importantly, financially secure enough to stop.
Policies that expand retirement saving, protect Social Security benefits, and strengthen disability support could help address these overlapping inequalities. Most importantly, retirement policy should not assume that an additional year of life or work has the same meaning for everyone. Longer lives represent genuine progress, but that progress will remain incomplete while the opportunity to enjoy a healthy and financially secure retirement depends so heavily on wealth.
Views of our Guest Bloggers are theirs alone, and not of the Pension Research Council, the Wharton School, or the University of Pennsylvania.
