Why age 70 isn’t the new 65

Anyone contemplating retirement should seek the advice of an objective adviser. Your CPA, attorney, or fiduciary financial adviser will help you determine the optimum time to take social security and other vital decisions. If you can try to work as long as you can. It does not have to be full time, however this will allow your savings to last longer. Most importantly this should be a lesson to younger employees to begin saving for retirement as eraly as possible.

retirement
retirement (Photo credit: 401(K) 2013)

The analysis looked at both income and age. As you might expect, projections for the lowest pre-retirement income quartile are the most sobering. This group would need to defer retirement to age 84 before 90 percent of them would have even a 50 percent probability of achieving comparable pre-retirement living standards. The results improve with income levels, but even among those in the highest income quartile, 90 percent have only a 50 percent chance of having enough to retire by 70. When broken out by age, the news isn’t much better: For one-third of households in which the people were between ages 30 and 59 as of 2007, working until age 70 won’t provide adequate income in retirement. 

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All this aside, buried in the report is a glimmer of hope — working longer does help. While only about half of households age 50-59 in 2007 could retire at 65, the number increases to nearly two-thirds if retirement age is increased to 70. Those extra five years have a dual effect. Not only do workers save more, they also delay dipping into their retirement funds, allowing those funds to continue growing.

In the past, I have extolled some of the non-financial benefits of working longer, namely the continued social interaction and intellectual engagement. A previous EBRI report confirmed that 92 percent of those who worked beyond the traditional retirement age of 65 do so because they want “to stay active and involved,” and 86 percent say they “enjoyed working.” The problem is that there are some real risks associated with relying on the “work longer” retirement plan, the most significant being: What if you lose your job?

If you need more evidence that you need to start saving for retirement now I’m not sure what to say. You are accountable for your financial future.

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