100

80

60

40

20

0

35 40 58 62 65 69

Men

Women

Labor Force Participation Rates of Men and Women, by Age, 2004

(Percentage of population)

Baby Boomers in 2004

CONGRESS OF THE UNITED STATES

CONGRESSIONAL BUDGET OFFICE

Disability and Retirement:

The Early Exit of Baby Boomers

from the Labor Force

NOVEMBER 2004

The Congress of the United States O Congressional Budget Office

CBO

Disability and Retirement:

The Early Exit of Baby Boomers

from the Labor Force

November 2004

A

PAPER

Preface

Although the oldest members of the baby-boom generation will not become eligible 

for Social Security retirement benefits until 2008, when they reach age 62, many of them 

already have left the labor force. This paper—prepared as part of the Congressional Budget 

Office’s (CBO’s) ongoing examination of the future composition of the labor force and the 

performance of the economy—uses data from a national survey to provide information about 

the men and women who leave the labor force before age 62 and their sources of income. 

In keeping with CBO’s mandate to provide objective, impartial analysis, the paper makes no 

recommendations.

Ralph E. Smith of CBO’s Health and Human Resources Division wrote the paper. Susan 

Labovich did the computer programming for the analysis, and Peter Richmond provided 

research assistance. The paper benefited from comments offered by June E. O’Neill, of Baruch 

College, City University of New York, and by Paul Cullinan, Molly Dahl, Noah Meyerson, 

Carla Tighe Murray, and Bruce Vavrichek, all of CBO.

Loretta Lettner edited the paper, and John Skeen proofread it. Ronald Moore produced drafts 

of the manuscript. Maureen Costantino designed the cover and prepared the paper for publication. Lenny Skutnik produced the printed copies, and Annette Kalicki prepared the electronic versions for CBO’s Web site (www.cbo.gov).

Douglas Holtz-Eakin

Director

November 2004

Introduction and Summary 1

Participation in, and Withdrawal from, the Labor Force 2

Who Stops Working Before Age 62, and What Do

They Live On? 5

Income and Assets 6

Poverty 8

Health Insurance 11

Characteristics of Men and Women Not in the

Labor Force 12

Appendix: The Survey of Income and Program

Participation 17

CONTENTS
vi DISABILITY AND RETIREMENT: THE EARLY EXIT OF BABY BOOMERS FROM THE LABOR FORCE

Tables

1. Labor Force Status of Men and Women Ages 50 to 61 and the

Main Reason for Nonparticipation, 2001 3

2. Income and Assets of Labor Force Participants and Nonparticipants

Ages 50 to 61, 2001 7

3. Sources of Income for Men Ages 50 to 61 Not Participating in the

Labor Force, 2001 9

4. Sources of Income for Women Ages 50 to 61 Not Participating in the

Labor Force, 2001 10

5. Poverty Rates of Labor Force Participants and Nonparticipants

Ages 50 to 61, 2001 12

6. Health Insurance Coverage Among Labor Force Participants and

Nonparticipants Ages 50 to 61, 2001 13

7. Characteristics of Labor Force Participants and Nonparticipants

Ages 50 to 61, 2001 14

Figures

1. Labor Force Participation Rates of Men and Women, by Age, 2004 2

2. Labor Force Participation Rates of Men and Women Ages 55 to 64,

1948 to 2003 4

Box

1. What Does “Disabled” Mean? 16
Disability and Retirement:

The Early Exit of Baby Boomers

from the Labor Force

Introduction and Summary

Members of the leading edge of the baby-boom generation—the large number of people born between 1946 

and 1964—turn 58 this year. Most of them will become 

eligible for Social Security retirement benefits when they 

reach age 62. And, at age 65, they will qualify for Medicare. Considerable attention has been paid to whether 

boomers have saved enough to afford to retire and to 

whether they will decide to continue working once they 

become eligible for Social Security and Medicare.1

Many boomers, however, are not waiting until age 62 or 

65 to stop working. Over 4 million already have left the 

labor force either because they are disabled or because 

they have retired. If they follow in the footsteps of workers now in their early 60s, perhaps one-third of the men 

and nearly half of the women will be out of the labor 

force before their 62nd birthday (see Figure 1). 

This paper examines the characteristics of men and 

women who leave the labor force before reaching age 62 

and analyzes their income sources given that they no 

longer work for pay. Most of the analysis concentrates on 

men and women ages 50 to 61 who were not in the labor 

force at any time in 2001—a group that includes not just 

the oldest boomers (those ages 50 to 55 in 2001), but also 

people born just before the baby boom began. (Information about the latter group offers insights into what could 

be in store for boomers as they age.) The empirical findings presented here are based largely on the Congressional 

Budget Office’s (CBO’s) analysis of data from the Survey 

of Income and Program Participation (SIPP), conducted 

by the Census Bureau. 

Because those data have several limitations, the qualitative findings of CBO’s analysis are more meaningful than 

the precise estimates. One drawback is that the data are 

based on survey responses, which are not always accurate. 

Moreover, some of the questions—such as those that attempt to identify why respondents were not in the labor 

force or those that try to determine the presence of a disability—call for subjective judgments on the part of the 

respondents, rather than strictly objective facts. In addition, care should be taken in extrapolating the results presented here to the future activities or well-being of 

younger baby boomers. For example, probably fewer of 

them will receive defined benefit pensions when they 

leave the labor force, but more of them will have participated in 401(k) or other defined contribution plans.

CBO’s analysis indicates that, overall, the men and 

women in their 50s and early 60s who were not in the labor force in 2001 had much lower median family income, fewer assets, and higher poverty rates than did 

their contemporaries who were still in the labor force (see 

Table 1).2

 They also were much less likely to have finished high school.

CBO found that those men and women who had left the 

labor force even though they were not yet old enough to 

receive Social Security retired-worker benefits did so for a 

small number of reasons: The most frequent reason they 

1. See, for example, Congressional Budget Office, Social Security: A 

Primer (September 2001), Baby Boomers’ Retirement Prospects

(November 2003), and The Long-Term Budget Outlook (December 

2003).

2. As measured by the Bureau of the Census, the poverty threshold 

in 2001 for a person under age 65 was about $9,200; for a married 

couple without children, it was about $11,900. 
2 DISABILITY AND RETIREMENT: THE EARLY EXIT OF BABY BOOMERS FROM THE LABOR FORCE

Figure 1.

Labor Force Participation Rates of Men and Women, by Age, 2004

(Percentage of population)

Source: Congressional Budget Office based on data from the Census Bureau’s Current Population Survey for the first nine months of 2004.

offered for not working was that they were disabled—accounting for almost two-thirds of the men who were not 

in the labor force and two-fifths of the women. Most of 

the other men said that they were retired. Most of the 

other women said that they were retired, caring for others, or not interested in working. 

Survey responses indicate that the circumstances of men 

and women not in the labor force because of a disability 

were quite different from those of the men and women 

who had retired. Among CBO’s findings: 

B Men and women not in the labor force because of a 

disability generally had much lower income, higher 

poverty rates, and fewer assets than those who were retired. The higher income of retired workers, especially 

that of the men, was in large part attributable to their 

receipt of a pension. Nearly three-quarters of the retired men and one-third of the retired women received 

income from their own defined benefit pension. 

B About 80 percent of the men and women who reported that they were not working because of a disability received Social Security Disability Insurance 

benefits and/or were in a family that received payments from the Supplemental Security Income program. Far fewer of those respondents—21 percent of 

the men and 9 percent of the women—received a pension. They also had fewer years of education than men 

and women not in the labor force for other reasons.

B While most of the people who were not in the labor 

force had health insurance, the sources of that coverage varied greatly, depending on the reason for nonparticipation. The major sources of coverage for the 

disabled were Medicare and Medicaid. The single major source of health insurance for retired workers was 

from an employer (either the former employer of the 

retiree or the current or former employer of the retiree’s spouse).

Participation in, and Withdrawal from, 

the Labor Force

Since the first baby boomers were born, major changes 

have occurred in the labor force participation patterns of 

older men and women (see Figure 2). In the late 1940s 

and early 1950s, 9 out of 10 men ages 55 to 64 particiMen

Women

Baby Boomers in 2004

100

80

60

40

20

0

35 40 58 62 65 69
DISABILITY AND RETIREMENT: THE EARLY EXIT OF BABY BOOMERS FROM THE LABOR FORCE 3

Table 1.

Labor Force Status of Men and Women Ages 50 to 61 and the Main Reason for

Nonparticipation, 2001 

Source: Congressional Budget Office based on data from the 2001 Survey of Income and Program Participation.

Notes: Respondents were included in the labor force if they reported that they had worked or looked for work at any time during 2001.

SSI = Supplemental Security Income.

* = not available because of the small sample size.

n.a. = not applicable.

a. Most of the men and women in this category reported that they were taking care of others or not interested in working.

b. For clarity of presentation, the numbers in this row provide the percentages of the total group not in the labor force or in the labor force 

in 2001, and the numbers in the next row disaggregate the group not in the labor force.

In Labor Force

Not in Labor Force During 2001, by Reason at Any Time

Retired Disabled Othera Total During 2001

Men

Size of Group

Percentage of totalb 14 86

Percentage of total not in labor force 32 64 4 100 n.a.

Income and Assets

Median family income (Dollars) 30,000 20,000 * 23,000 62,000

Median net worth (Dollars) 231,000 19,000 * 61,000 148,000

Percentage who were poor 15 24 * 21 3

Percentage receiving a defined

benefit pension 73 21 * 37 13

Percentage receiving

Social Security or SSI 9 82 * 56 5

Percentage Without Health Insurance 9 11 * 11 11

Percentage Without a High School Diploma 11 34 * 26 11

Women

Size of Group

Percentage of totalb 24 76

Percentage of total not in labor force 26 40 34 100 n.a.

Income and Assets

Median family income (Dollars) 34,000 19,000 43,000 30,000 54,000

Median net worth (Dollars) 218,000 14,000 120,000 82,000 132,000

Percentage who were poor 14 34 10 21 3

Percentage receiving a defined

benefit pension 35 9 8 15 7

Percentage receiving 

Social Security or SSI 20 79 13 41 7

Percentage Without Health Insurance 9 13 19 14 9

Percentage Without a High School Diploma 15 40 26 29 8
4 DISABILITY AND RETIREMENT: THE EARLY EXIT OF BABY BOOMERS FROM THE LABOR FORCE

Figure 2.

Labor Force Participation Rates of Men and Women Ages 55 to 64, 1948 to 2003

(Percent)

Source: Congressional Budget Office based on data from the Bureau of Labor Statistics.

1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003

0

20

40

60

80

100

Men

Ages 55 to 64

Ages 55 to 59

Ages 60 to 61

Ages 62 to 64

1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003

0

20

40

60

80

100

Women

Ages 55 to 64

Ages 55 to 59

Ages 60 to 61

Ages 62 to 64
DISABILITY AND RETIREMENT: THE EARLY EXIT OF BABY BOOMERS FROM THE LABOR FORCE 5

pated in the labor force, whereas fewer than 1 in 3 

women did. Since the mid-1980s, however, only about 

two-thirds of men in that age group have participated in 

the labor force. Meanwhile, the labor force participation 

rate of women in that age group rose appreciably: in recent years, well over half have been in the labor force. 

Why do some people stop working or looking for work 

before they become eligible for Social Security retirement 

benefits while others stay in the labor force long afterward? Individuals stop participating in the labor force if 

they decide that the benefits of working or seeking work 

no longer outweigh the costs of doing so. Those benefits 

include not just after-tax wages and other job-related remuneration, but also nonfinancial benefits (such as personal satisfaction and a social network). Likewise, the 

costs go well beyond the out-of-pocket expenses related 

to working (such as those for commuting and clothing). 

For most workers, the major cost is the value of the activities forgone while working—that is, the benefits they 

would have derived from whatever they could have done 

instead.

An extensive body of literature on retirement decisions 

highlights the disincentives or barriers that lead many 

workers to decide to leave the labor force well before they 

become eligible for Social Security retirement benefits. 

The availability and structure of defined benefit pension 

plans, in particular, have been linked to early retirement. 

In those plans, when workers reach a certain age and have 

been with their employer a specified number of years, 

they qualify for a pension. Specific features of defined 

benefit plans place a large effective tax on people who, 

once eligible for a pension, remain with the same employer. Those features include less-than-actuarially fair 

accrual rates for additional pension benefits and legal restrictions that limit the ability of a worker to draw a pension while continuing to work for that employer. 

Although workers can respond to those disincentives by 

changing employers rather than retiring, the compensation from their next-best job may be well below what 

they currently earn. For employers, seniority-based systems may result in wages for older workers that exceed 

their actual or perceived productivity, discouraging employers from hiring or retaining such workers. Higher average costs of health insurance for older workers may further reduce employers’ incentives to employ them. 

Likewise, older workers who lose their job may have considerable difficulty finding a new one that pays nearly as 

much as the one they lost, and they might respond by 

leaving the labor force.3

Researchers have linked the long-term decline in the labor force participation rate of older men to the nation’s 

greater affluence.4 Pensions, Social Security, and private 

savings have enabled many workers to exit the labor force 

without being financially dependent on their children. 

The early-retirement incentives commonly found in defined benefit pension plans, noted previously, may further encourage workers to leave the labor force before 

they qualify for Social Security retirement benefits. In recent years, however, the decline in defined benefit pension plan coverage and the rise of 401(k) and other defined contribution plans have reduced the fraction of the 

workforce facing those incentives.5

The future course of the labor force participation rate of 

older men is difficult to predict, in part because of different expected trends in its determinants. The nation’s 

economy is likely to continue to grow, which could facilitate early retirement. However, the switch from defined 

benefit pension plans to defined contribution plans, 

along with increasing life spans, could discourage early retirement. CBO projects that the participation rate of men 

in their late 50s and early 60s will remain near its current 

level during the next decade.6 By contrast, CBO anticipates that the participation rate of women in that age 

group will continue to rise as the cohorts with a greater 

attachment to the labor force enter their late 50s and 

early 60s.

Who Stops Working Before Age 62, and 

What Do They Live On?

The analysis presented here is based largely on information obtained from the 2001 Survey of Income and Pro3. In January 2004, about 57 percent of workers ages 55 to 64 who 

were displaced in 2001, 2002, or 2003 were reemployed, compared with 69 percent of the displaced workers ages 25 to 54. See 

U.S. Bureau of Labor Statistics, “Worker Displacement, 2001-

03,” U.S. Department of Labor News 04-1381 (July 30, 2004). 

4. See Dora L. Costa, The Evolution of Retirement (Chicago: University of Chicago Press, 1998).

5. See Leora Friedberg and Anthony Webb, Retirement and the Evolution of Pension Structure, Working Paper No. 9999 (National 

Bureau of Economic Research, September 2003).

6. Congressional Budget Office, CBO’s Projections of the Labor Force 

(September 2004), available at www.cbo.gov.
6 DISABILITY AND RETIREMENT: THE EARLY EXIT OF BABY BOOMERS FROM THE LABOR FORCE

gram Participation. The sample relevant to this analysis 

consists of about 8,500 men and women ages 50 through 

61 in 2001. The majority of that group were born during 

the baby boom. The others (ages 56 and older) were born 

earlier, but their inclusion provides additional information about the characteristics and resources of people who 

leave the labor force before becoming eligible for Social 

Security retirement benefits. For the purposes of this 

analysis, particular attention is paid to the income, assets, 

and characteristics of the 14 percent of men and 24 percent of women ages 50 through 61 who reported that 

they had not worked or looked for work at any time during 2001. (Additional information about the SIPP is provided in the appendix.)

Those who were not in the labor force during that period 

were classified according to the main reason they provided for not working: 32 percent of the men and 26 percent of the women not in the labor force indicated that 

they were retired; 64 percent of the men and 40 percent 

of the women said that they were disabled; and, 4 percent 

of the men and 34 percent of the women said that they 

were taking care of others, not interested in working, 

temporarily ill or injured, could not find work, or were 

out of the workforce for other reasons.7

On the basis of information that the respondents provided about their previous employment history and about 

their activities during the following year (2002), most of 

the men and women who were not in the labor force at 

any time in 2001 appear to have worked earlier but to 

have since totally withdrawn from the labor force. Only 3 

percent of the male respondents who were not in the labor force in 2001 and 12 percent of the women said that 

they had never worked. Among the respondents for 

whom information was available for all of 2002, only 5 

percent of the men and 6 percent of the women reported 

any subsequent earnings, and most of them earned less 

than $6,000 that year. 

Income and Assets

The men and women in their 50s and early 60s who were 

not in the labor force had much lower median family income than did the men and women who were still in the 

labor force (see the last two columns of Table 2). They 

also had far fewer assets.

Among the men and women who were not in the labor 

force, those who had retired generally were in a much 

stronger financial position than those who were out of 

the labor force because of a disability. (Retired workers 

typically had lower income than did those who were still 

in the labor force, but more assets.) Retired men had a 

median family income of about $30,000 and a net worth, 

including home equity, that exceeded $200,000.8

 The 

median income of disabled men was only about $20,000, 

and their net worth (at $19,000) was less than one-tenth 

that of retired men. Such variations also were found for 

retired and disabled women.

For many people, equity in their house constitutes their 

largest single asset. Excluding home equity from calculations of net worth made the differences between retired 

and disabled men and women starker: excluding home 

equity, the household net worth of the typical retired 

man or woman was about $90,000. The household net 

worth of the median disabled man or woman, however, 

was only about $1,000 or $2,000. 

For two reasons, the differences in average well-being 

may well be larger than even those estimates of income 

and net worth suggest. First, most of the retired men and 

women could anticipate becoming eligible for Social Security retired worker benefits when they reach age 62, 

which will add to their other income. But the majority of 

disabled men and women already were receiving a Social 

7. See Box 1 on page 16 for a discussion of issues related to the measurement of disability. CBO reclassified as disabled a small number of individuals who reported that they received Social Security 

Disability Insurance benefits but did not give disability as their 

main reason for not working. Most of the respondents who gave a 

reason other than retirement or disability said that they were taking care of others or not interested in working.

8. Unlike the data on income, the information about assets and liabilities from the SIPP includes household members not related to 

the respondent. For example, if the respondent shared living quarters with unrelated persons, their combined assets and liabilities 

were counted. 

Although the assets recorded in the SIPP include the value of various retirement accounts (such as 401(k)s and individual retirement accounts, or IRAs), they do not include the value of Social 

Security benefits and defined benefit pensions that the respondents or other members of their household might later receive.
DISABILITY AND RETIREMENT: THE EARLY EXIT OF BABY BOOMERS FROM THE LABOR FORCE 7

Table 2.

Income and Assets of Labor Force Participants and Nonparticipants Ages 50 to 61, 2001 

(Dollars)

Source: Congressional Budget Office based on data from the 2001 Survey of Income and Program Participation.

Notes: Respondents were included in the labor force if they reported that they had worked or looked for work at any time during 2001.

* = not available because of the small sample size; IRA = individual retirement account.

a. Most of the men and women in this category reported that they were taking care of others or not interested in working.

Security disability benefit and consequently will not become eligible for any additional Social Security benefit at 

age 62.9

Second, workers who decided to retire because they felt 

that they could afford to do so and wanted to do something else with their time presumably were better off than 

if they had remained at work, assuming that their expectations were realized. Even though they no longer had the 

earnings from their former job, they had more time to do 

other things. Those who were not working because of a 

disability may have had less of a choice. 

The higher average income of the men and women who 

had retired, as opposed to having left the labor force because of a disability, is associated largely with the greater 

likelihood of their having a pension. Nearly three-quarters of the men and about one-third of the women who 

had retired were receiving a pension in 2001, accounting 

In Labor Force

Not in Labor Force During 2001, by Reason at Any Time

Retired Disabled Othera Total During 2001

Men

Median Family Income 29,600 20,200 * 23,200 61,800

Median Net Worth

Including home equity 230,800 19,100 * 61,400 147,600

Excluding home equity 88,800 2,200 * 7,900 55,000

Percentage with an IRA, 401K, 

or Keogh Account 47 6 * 19 50

Women

Median Family Income 34,500 18,600 43,100 30,400 54,400

Median Net Worth

Including home equity 217,600 13,500 120,000 81,700 132,500

Excluding home equity 90,500 1,200 27,000 12,900 42,400

Percentage with an IRA, 401K, 

or Keogh Account 33 6 19 18 49

9. In most cases, they will continue to receive the same monthly 

Social Security benefit, adjusted for inflation, for the rest of their 

life. If they are married, however, their spouse might become eligible for a new benefit or a higher benefit when he or she reaches 

age 62.
8 DISABILITY AND RETIREMENT: THE EARLY EXIT OF BABY BOOMERS FROM THE LABOR FORCE

for a substantial portion of their average income (see Tables 3 and 4).10 Most of the average income of retired 

men came from their pension, earnings of family members (usually a wife), and income from assets. For retired 

women, their husband’s pension and Social Security also 

were major sources.11

Benefits from Social Security Disability Insurance and 

Supplemental Security Income (SSI), along with the 

earnings of family members, were the main sources of income for disabled men and women. Almost two-thirds of 

the disabled men received Social Security disability benefits and more than one-third received SSI. A slightly 

smaller portion of the disabled women received Social Security disability benefits, but more received SSI. Few disabled men or women received pensions, and, among 

those who did, their average pension was only about half 

that of retired pensioners.

Those women not in the labor force because they were 

caring for others or for other reasons had a much higher 

median income than did women who said they were retired or disabled. The difference is largely attributable to 

the fact that a much higher percentage of them had husbands still in the workforce and that their husbands’ average earnings were substantially higher than the earnings 

of retired or disabled women’s husbands.

Care must be taken in drawing conclusions about the future economic well-being of people not in the labor force 

in 2001 or the well-being of workers who subsequently 

leave the labor force. In particular, the value of various assets—including homes and stocks—could well be different in the future. Also, it is likely that a smaller percentage of future retired workers will have participated in 

defined benefit pension plans, as coverage in those plans 

gives way to coverage in defined contribution plans, such 

as 401(k) plans.12

Poverty

Another gauge of a group’s economic status is the percentage who are poor. In 2001, an individual under age 

65 was considered poor by the Bureau of the Census if his 

or her family’s cash income for the year was below about 

$9,200. The threshold for a married couple was about 

$11,900. 

In general, people in their 50s and early 60s who continue to work are at or near their peak earnings years. 

Thus, it is not surprising that very few of those who remained in the labor force were poor. Likewise, it is not 

surprising that the men and women who were not in the 

labor force had a much higher poverty rate than did those 

still in the labor force: 21 percent versus 3 percent (see 

Table 5).

The retired workers fared much better than did the men 

and women who were not in the labor force because of a 

disability. Fifteen percent of the retired men and 14 percent of the retired women had income below the poverty 

threshold, compared with 24 percent of the disabled men 

and 34 percent of the disabled women.

One limitation of the way poverty is measured is that it 

does not take into account assets owned by individuals 

and their families except to the extent that the assets produce current income (for example, interest and dividends). Two people may have the same cash income, but 

if one owns a house and has an IRA and the other does 

not, their actual economic situations are quite different. 

The assets are available to meet future spending needs, 

whether or not they produce current income. 

The extent to which the retired workers with low income 

but substantial assets might be better off than their annual income suggests can be gauged by translating those 

assets into the annual income they would produce if converted into an annuity. Such a calculation, using 

10. The average annual incomes displayed in Tables 3 and 4 are 

higher than the median incomes reported in Table 2. Although 

medians are better for depicting the income of a typical person in 

a group, such as retired men, average incomes provide a better 

base for describing the sources of a group’s income.

11. Four percent of the retired men and 10 percent of the retired 

women said that they received their own Social Security benefits 

on the basis of being a retired worker. Because workers do not 

qualify for retired worker benefits until age 62, those respondents 

were mistaken about receiving Social Security, the reason they 

were receiving it, or their age. (About 5 percent of the retired 

women said that they received Social Security benefits because 

they were the widow of a deceased worker, which is permitted at 

age 60 or at any age if the recipient is caring for a minor child.)

12. During the past decade, the percentage of full-time workers in private industry who participated in defined benefit plans fell from 

33 percent to 24 percent, while participation in defined contribution plans rose from 40 percent to 48 percent. See William 

Wiatrowski, “Medical and Retirement Plan Coverage: Exploring 

the Decline in Recent Years,” Monthly Labor Review (August 

2004), pp. 29-36.
DISABILITY AND RETIREMENT: THE EARLY EXIT OF BABY BOOMERS FROM THE LABOR FORCE 9

Table 3.

Sources of Income for Men Ages 50 to 61 Not Participating in the

Labor Force, 2001

Source: Congressional Budget Office based on data from the 2001 Survey of Income and Program Participation.

Note: SSI = Supplemental Security Income.

a. Includes some sources not listed.

Percentage

Receiving Income Average Annual Amount (Dollars)

from Designated For Recipients of Income For All

Income Source Source from Designated Source in the Group

Retired

All Available Sourcesa 99 33,800 33,400

Earnings of Spouse or

Other Family Members 38 26,100 9,800

Pension

Own 73 19,300 14,100

Spouse’s 10 6,500 700

Social Security

Own 4 7,100 300

Spouse’s or other

family members’ 11 8,100 900

Property 82 5,400 4,400

SSI 5 7,800 400

Veterans’ Benefits 5 10,800 500

Disabled

All Available Sourcesa 99 28,700 28,300

Earnings of Spouse or

Other Family Members 44 24,900 11,100

Pension

Own 21 10,300 2,100

Spouse’s 3 10,800 300

Social Security

Own 64 8,600 5,500

Spouse’s or other

family members’ 24 8,100 1,900

Property 43 1,100 500

SSI 37 6,100 2,300

Veterans’ Benefits 15 11,400 1,700
10 DISABILITY AND RETIREMENT: THE EARLY EXIT OF BABY BOOMERS FROM THE LABOR FORCE

Table 4.

Sources of Income for Women Ages 50 to 61 Not Participating in the

Labor Force, 2001

Continued

Percentage

Receiving Average Annual Amount (Dollars)

Income from For Recipients of Income For All

Income Source Designated Source from Designated Source in the Group

Retired

All Available Sourcesa 100 44,300 44,300

Earnings of Spouse or

Other Family Members 46 46,400 21,400

Pension

Own 35 13,600 4,800

Spouse’s 44 16,900 7,500

Social Security

Own 15 4,000 600

Spouse’s or other

family members’ 34 10,500 3,600

Property 82 5,200 4,300

SSI 6 5,800 400

Veterans’ Benefits 6 7,200 500

Disabled

All Available Sourcesa 99 25,900 25,800

Earnings of Spouse or

Other Family Members 48 26,100 12,500

Pension

Own 9 7,700 700

Spouse’s 13 11,600 1,500

Social Security

Own 58 5,800 3,400

Spouse’s or other

family members’ 30 8,100 2,400

Property 38 1,900 700

SSI 44 5,000 2,200

Veterans’ Benefits 4 5,600 200
DISABILITY AND RETIREMENT: THE EARLY EXIT OF BABY BOOMERS FROM THE LABOR FORCE 11

Table 4.

Continued

Source: Congressional Budget Office based on data from the 2001 Survey of Income and Program Participation.

Note: SSI = Supplemental Security Income.

a. Includes some sources not listed.

b. Most of the women in this category reported that they were taking care of others or not interested in working.

each retired worker’s net worth, excluding home equity, 

reduces the estimated number of poor retired workers: 

the percentage of retired men with family income below 

their poverty threshold falls from 15 percent to 11 percent; the percentage of retired women counted as poor 

falls from 14 percent to 11 percent.13 Annuitizing each 

retired worker’s home equity reduces the estimated poverty rates of retired men and retired women to about 5 

percent and 9 percent.

Including the annuity value of the assets of those men 

and women not in the labor force because of a disability 

makes very little difference because they had so few assets—especially those with low cash income. Even allowing for the equity in their homes, about one-quarter of 

the disabled men and one-third of the disabled women 

still would have income below the poverty threshold. 

Health Insurance

Besides causing a decline in cash income, withdrawal 

from the labor force also may put at risk a worker’s access 

to health insurance. Most adults under age 65 obtain 

health insurance coverage through their own or their 

spouse’s employer. The cost of employer-sponsored insurance generally is much lower than the cost of insurance 

that a worker can obtain in the individual health insurance market. Moreover, employers typically pay the maPercentage

Receiving Average Annual Amount (Dollars)

Income from For Recipients of Income For All

Income Source Designated Source from Designated Source in the Group

Otherb

All Available Sourcesa 98 63,200 61,700

Earnings of Spouse or

Other Family Members 77 64,900 50,000

Pension

Own 8 7,500 600

Spouse’s 21 16,400 3,400

Social Security

Own 6 4,300 200

Spouse’s or other 23 8,900 2,000

family members’

Property 74 3,200 2,400

SSI 9 5,300 500

Veterans’ Benefits 8 7,400 600

13. CBO calculated the annuity rate based on the individual’s age and 

marital status. For example, for unmarried individuals, it ranged 

from 4.4 percent for a person age 50 to 5.9 percent for a person 

age 61; for married individuals, the range was 3.7 percent to 4.8 

percent. Those rates were based on the annuities offered to retired 

federal workers through the Thrift Savings Plan in September 

2004. CBO used the annuity option in which payments increased 

by up to 3 percent per year, on the basis of increases in the consumer price index. For married individuals, CBO also specified 

joint life annuities with 100 percent to the survivor. 

For this calculation, each person’s total family income was 

increased by the difference between the estimated annuity value of 

his or her net worth, excluding home equity, and his or her 

reported property income. If the reported property income was 

higher than the estimated annuity, no adjustment was made.
12 DISABILITY AND RETIREMENT: THE EARLY EXIT OF BABY BOOMERS FROM THE LABOR FORCE

Table 5.

Poverty Rates of Labor Force Participants and Nonparticipants

Ages 50 to 61, 2001

(Percent)

Source: Congressional Budget Office based on data from the 2001 Survey of Income and Program Participation.

Notes: Respondents were included in the labor force if they reported that they had worked or looked for work at any time during 2001.

* = not available because of the small sample size.

a. Most of the men and women in this category reported that they were taking care of others or not interested in working.

jority of the premium, which is not counted as taxable income to the worker. 

Most men and women ages 50 through 61 were covered 

by a health insurance policy at the end of 2001, whether 

or not they were in the labor force (see Table 6). Most of 

those in the labor force were covered by an employersponsored plan—either through their own current or 

former employer or that of their spouse. 

The main source of health insurance for people not in the 

labor force varied widely, depending on whether they 

were not working because of a disability, because they had 

retired, or because of another reason. About half of the 

disabled were covered by Medicare or Medicaid, whereas 

roughly three-quarters of the retired men and women 

were covered by employer-sponsored health insurance (either their own or that of a spouse). Women who were not 

in the labor force because they were caring for others or 

not interested in working or for other reasons were more 

likely than other women to be uninsured (19 percent, 

compared with 13 percent of disabled women, 9 percent 

of retired women, and 9 percent of women still in the labor force).

Characteristics of Men and Women Not in the

Labor Force

As noted previously, 14 percent of the men and 24 percent of the women ages 50 to 61 were not in the labor 

force in 2001. They differed from their contemporaries 

who remained in the labor force in several ways (see 

Table 7). Moreover, among the men and women not in 

the labor force, there were further distinctions between 

those who had left the labor force because of a disability 

and those who had retired.14

In Labor Force

Not in Labor Force During 2001, by Reason at Any Time

Retired Disabled Othera Total During 2001

Based on Cash Income

Men 15 24 * 21 3

Women 14 34 10 21 3

Based on Cash Income Plus 

Annuity Value of Net Worth 

(Excluding home equity)

Men 11 24 * 20 3

Women 33 9 19 3

Based on Cash Income Plus 

Annuity Value of Net Worth 

(Including home equity)

Men 5 23 * 17 2

Women 9 31 8 17 3

14. The patterns among people ages 50 to 61 described here were 

found for narrower age groups as well, with the important difference being that older members of this group had uniformly lower 

labor force participation rates.
DISABILITY AND RETIREMENT: THE EARLY EXIT OF BABY BOOMERS FROM THE LABOR FORCE 13

Table 6.

Health Insurance Coverage Among Labor Force Participants and Nonparticipants 

Ages 50 to 61, 2001

(Percent)

Source: Congressional Budget Office based on data from the 2001 Survey of Income and Program Participation.

Notes: Respondents were included in the labor force if they reported that they had worked or looked for work at any time during 2001.

* = not available because of the small sample size.

a. Most of the men and women in this category reported that they were taking care of others or not interested in working.

Educational Attainment. Only 13 percent of the men ages 

50 to 61 who were not in the labor force had graduated 

from college, compared with 34 percent of the men still 

in the labor force in 2001. Likewise, about one-quarter of 

the men no longer in the labor force had not completed 

high school, compared with only 1 in 10 of the men still 

in the labor force.

Those differences are almost entirely attributable to the 

much lower educational attainment of men who were not 

in the labor force because of a disability. For instance, 

while only 5 percent of the disabled men had graduated 

from college, 34 percent had not finished high school. By 

contrast, the educational attainment of men who said 

that they had retired was akin to that of men still in the 

labor force.

The situation for women is similar. Few of the women 

not in the labor force because of a disability had graduated from college, while 40 percent of the disabled 

women had not completed high school. Women who had 

retired also were more likely than women still in the labor 

force not to have completed high school, but the difference was much smaller. (Women not in the labor force 

for other reasons—because they were caring for others, 

for instance—were more likely to have completed high 

school than were the disabled women, but less likely than 

were the retired women.)

Marital Status. A smaller percentage of men not in the labor force were married (55 percent), compared with men 

in the labor force (74 percent). That difference, for the 

most part, is associated with the men not in the labor 

force because of a disability: only half of the men not in 

the labor force as a result of a disability were married, 

compared with over two-thirds of retired men. 

Although women not in the labor force were as likely to 

be married as those in the labor force, there were major 

differences between those women not in the labor force 

because of a disability and other nonworking women. 

In Labor Force

Not in Labor Force During 2001, by Reason at Any Time

Source of Coverage Retired Disabled Othera Total During 2001

Men

Employer-Sponsored 76 33 * 47 82

Medicare, Medicaid 4 52 * 35 1

Other Coverage 11 4 * 7 6

Uninsured 9 11 * 11 11

100 100 100 100

Women

Employer-Sponsored 73 27 64 52 82

Medicare, Medicaid 4 53 6 24 2

Other Coverage 14 7 11 10 7

Uninsured 9 13 19 14 9

100 100 100 100 100
14 DISABILITY AND RETIREMENT: THE EARLY EXIT OF BABY BOOMERS FROM THE LABOR FORCE

Table 7.

Characteristics of Labor Force Participants and Nonparticipants Ages 50 to 61, 2001

(Percent)

Continued

Less than half of the disabled women were married, compared with three-quarters of the women who had retired. 

Origin. Men not born in the United States were slightly 

more likely to be in the labor force than were native-born 

men; by contrast, foreign-born women were slightly less 

likely to be in the labor force. For men, the biggest difference was in the share that were retired: only 4 percent of 

retired men were foreign born, compared with 9 percent 

of men not in the labor force because of a disability and 

11 percent of men in the labor force. Foreign-born 

women were much more likely than native-born women 

to be out of the labor force because they were taking care 

of others or not interested in working: they constituted 

19 percent of that group, compared with only 10 percent 

of the women in the labor force. 

Age Last Worked. Nearly all (97 percent) of the men who 

were not in the labor force said that they had worked earlier. Those who left the labor force because of a disability 

were much more likely than the retired workers to have 

withdrawn before age 50. A lower percentage of women 

In Labor Force

Not in Labor Force During 2001, by Reason at Any Time

Retired Disabled Othera Total During 2001

Men

Education

Did not finish high school 11 34 * 26 11

High school diploma 33 37 * 35 26

Some college 26 24 * 25 28

College graduate 30 5 * 13 34

100 100 100 100

Marital Status

Married 70 49 * 55 74

Divorced, separated, widowed 23 36 * 31 20

Never married 8 15 * 14 5

Origin

Native born 96 91 * 93 89

Foreign born 4 9 * 7 11

Age Last Worked

50 or later 84 32 * 49 100

Before 50 15 64 * 48 0

Never employed 1 4 * 3 0

Disability Status

Work-limiting disability 28 100 * 25 16

None 72 0 * 75 84
DISABILITY AND RETIREMENT: THE EARLY EXIT OF BABY BOOMERS FROM THE LABOR FORCE 15

Table 7.

Continued

Source: Congressional Budget Office based on data from the 2001 Survey of Income and Program Participation.

Notes: Respondents were included in the labor force if they reported that they had worked or looked for work at any time during 2001.

* = not available because of the small sample size.

a. Most of the men and women in this category reported that they were taking care of others or not interested in working.

not in the labor force (88 percent) said that they once had 

worked, and many more (53 percent) said that they had 

stopped working before age 50. The women not in the labor force because of a disability or for other reasons were 

less likely than retired women to have worked at one 

time, and, if they did, were more likely to have stopped 

working before age 50.

Disability Status. Respondents—whether or not they 

were working—were asked whether they had a physical, 

mental or other health condition that limited the kind or 

amount of work they could do. Predictably, virtually all 

who cited disability as the main reason they were not in 

the labor force answered the question affirmatively. In addition, about 15 percent of the men and women who 

were still in the labor force said that they had a worklimiting disability, as did almost 30 percent of the retired 

workers. That is, while having a work-limiting disability 

did not necessarily result in a person’s leaving the labor 

force, it did increase the likelihood that he or she would 

do so (see Box 1).

In Labor Force

Not in Labor Force During 2001, by Reason at Any Time

Retired Disabled Othera Total During 2001

Women

Education

Did not finish high school 15 40 26 29 8

High school diploma 32 34 34 34 33

Some college 24 22 24 23 31

College graduate 29 4 15 14 28

100 100 100 100 100

Marital Status

Married 75 46 83 66 65

Divorced, separated, widowed 19 46 13 28 29

Never married 6 8 3 6 7

Origin

Native born 88 91 81 87 90

Foreign born 12 9 19 13 10

Age Last Worked

50 or later 60 25 29 35 100

Before 50 32 64 55 53 0

Never employed 8 11 16 12 0

Disability Status

Work-limiting disability 28 99 26 55 15

None 72 1 74 45 85
16 DISABILITY AND RETIREMENT: THE EARLY EXIT OF BABY BOOMERS FROM THE LABOR FORCE

Box 1.

What Does “Disabled” Mean?

Most of the analysis in this paper is based on a selfreported interpretation of why people are not working, rather than on an objective measure of impairment. The Congressional Budget Office classified respondents in the Survey of Income and Program 

Participation (SIPP) as disabled if they said that the 

main reason they were not working was that they 

had a chronic health condition or disability, rather 

than that they had retired, were caring for others, 

were not interested in working, or had another reason. An additional, more expansive, measure of disability available in the SIPP (and used in this paper) 

is based on individuals’ responses to a question about 

whether they had a physical, mental or other health 

condition that limited the kind or amount of work 

they could do. About 15 percent of the respondents 

who were still in the labor force and almost 30 percent of the retired workers said that they did have a 

work-limiting disability. As suggested by those responses, individuals can consider themselves to have 

a disability and yet still continue to work.

Researchers have long debated how best to define 

and measure disability.1 Some definitions are based 

on whether an individual has one or more specific 

impairments—for example, the loss of a leg. Others, 

such as the work-limiting disability measurement 

noted above, are based on a functional limitation 

that could be affected by circumstances other than 

the specific impairment itself. For example, a person 

with a college degree working in an office is less 

likely than a high school dropout working in a factory to consider the loss of a leg to be a relevant disability. 

Different public programs and policies use varying 

criteria. The Americans with Disabilities Act, for example, defines disability as a physical or mental impairment that substantially limits one or more of the 

major life activities. Eligibility for benefits from the 

Social Security Disability Insurance program is 

based, in part, on a much narrower criterion: the inability to engage in “substantial gainful activity” by 

reason of a physical or mental impairment that is expected to last for at least 12 months or to result in 

death.

1. For a recent comprehensive examination of this topic, see 

David C. Stapleton and Richard V. Burkhauser, eds., The 

Decline in Employment of People with Disabilities: A Policy 

Puzzle (Kalamazoo, Michigan: W. E. Upjohn Institute for 

Employment Research, 2003). Much of the discussion in 

this box is based on that volume.
Appendix: The Survey of Income

and Program Participation

The Survey of Income and Program Participation 

(SIPP) is a longitudinal survey of the population of the 

United States that has been conducted by the Bureau of 

the Census since the mid-1980s. Each panel comprises a 

nationally representative sample of households selected 

by the bureau and interviewed every four months for up 

to four years. The sample of the population used in this 

paper came from the panel begun in 2001, the most recent panel available. The panel originally consisted of 

about 35,000 households, but attrition reduced the size 

of the panel interviewed in subsequent waves of the survey. The sample relevant to the main part of the analysis 

presented in this paper consists of about 8,500 people—

approximately 4,100 men and 4,400 women—who were 

ages 50 through 61 at the end of 2001 and for whom sufficient information existed for each month of that year 

(the first three or four waves of the survey, depending on 

when the respondents were first interviewed). 

Characteristics and Labor Force Status

Most of the information about the personal characteristics of the respondents reported in the analysis of individuals ages 50 through 61 comes from responses to questions asked in the third or fourth interview. The 

Congressional Budget Office (CBO) calculated the age of 

respondents in December 2001 using their reported date 

of birth; in cases in which the year of birth was reported 

but not the month, July was used. 

Labor force status was determined on the basis of answers 

to questions about activities during each month of 2001. 

Individuals were counted as participating in the labor 

force during 2001 if they had worked or looked for work 

at any time during that year. Otherwise, they were 

counted as not in the labor force. 

Respondents not in the labor force were categorized according to their answer to the question “What is the main 

reason you did not work at a job or business between . . . 

and today?” Those who responded that they were retired 

or that they were unable to work because of a chronic 

health condition or disability were classified, respectively, 

as “retired” or “disabled.” All others were classified as 

“other.” They included those who said that they were 

temporarily unable to work because of an injury or illness, those out of the labor force because of pregnancy or 

childbirth, those taking care of children or others, those 

going to school, those unable to find work or who had 

been laid off, those not interested in working in the paid 

labor force, or those not working for other reasons. However, about 80 respondents who said that they were receiving Social Security Disability Insurance benefits did 

not give disability as their main reason for not working. 

CBO reclassified them as disabled. 

Income, Poverty, and Assets

The sources and amount of a respondent’s annual income 

were calculated by summing the respondent’s answers to 

the monthly-income questions asked in each interview. 

The annual incomes reported in this paper were calculated by summing the incomes reported during the twelve 

months of 2001. Individuals were counted as poor if their 

family income fell below the poverty threshold used by 

the Census Bureau for their family size.

The Census Bureau collected asset information for each 

household in a set of supplementary questions asked during the third interview, which occurred in late 2001. Net 

worth is based on the sum of the market value of assets 

owned by every member of the respondent’s household 

minus the liabilities owed by household members. Assets 

include homes, other real estate, cars, businesses, and financial assets. Individual retirement accounts are included, but the value of future Social Security and pension benefits is not. Unlike the information on income, 
18 DISABILITY AND RETIREMENT: THE EARLY EXIT OF BABY BOOMERS FROM THE LABOR FORCE

the data on assets and liabilities include household members who are not related to the respondent. 

Respondents might report that they were receiving benefits from one public program when those benefits actually 

came from another source, or they might incorrectly report the amount of income they had received. For example, some of the respondents who said that they received 

Social Security retired worker benefits were not old 

enough to be eligible for those benefits. (That particular 

discrepancy could result from a mistake either about the 

actual source of their income or about their age.) 

Annuitizing Net Worth

Someone who is not in the labor force and has considerable assets but very little income is in a better position to 

meet his or her spending needs than someone with the 

same income who has few assets. Some respondents who 

lived in households with substantial net worth reported 

little or no income from interest, dividends, or other asset-related sources. In many cases, the lack of reported income simply reflects the fact that some assets—notably 

the equity in owner-occupied homes—do not produce 

cash income. In some cases, the lack of reported income 

may be because the actual owner of the asset is someone 

living in the respondent’s household who is not a relative. 

In other cases, the respondents may not report income 

from an asset because they do not consider that income as 

available for current consumption or because they do not 

remember that particular income source. Interest and 

dividends from assets held in a 401(k) or individual retirement account, for example, might not be reported because they are not considered current income for tax purposes.

To get an indication of how much difference those assets 

might make, CBO calculated the annual income that 

each respondent’s reported level of assets could generate if 

those assets were used to purchase an annuity. For single 

people, the annuity would provide an annual income for 

the remainder of the annuitant’s life, adjusted each year 

for inflation, up to 3 percent. For married people, the annuity would provide an annual income for the remainder 

of the annuitant’s life, or that of his or her spouse, also 

adjusted for inflation. The specific annuity rates used for 

those calculations were based on the age and marital status of the respondent, using rates quoted by the Thrift 

Savings Plan on its Web site in mid-September 2004. 

The relevant rates ranged from 3.7 percent for a married 

annuitant age 50 to 5.9 percent for a single annuitant age 

61. For example, the annuity for a single person age 61 

who reported a net worth of $100,000 would be $5,900 

per year. If the amount from the annuity exceeded the interest, dividends, and other property income reported by 

that person, it was substituted for the reported amount of 

property income and used to produce an adjusted income. Two sets of estimates were made: one based on the 

annuitization of the respondent’s entire net worth, including home equity, and the other based on net worth 

excluding home equity.

Adjusted poverty rates then were calculated for each labor 

force status group on the basis of those adjusted incomes. 

As reported in the text, the adjustments were largest for 

those men and women who were not in the labor force 

because they had retired.