Bummer: Most of us won’t be able to retire until our 80s

Posted by David Gomez

Did you think that you were going to be able to retire in the late 50’s to mid 60’s age range like your parents? Guess again.

According to MarketWatch, the latest economic research shows that you’ll have to work much longer than you might have anticipated. Working longer to save for retirement isn’t an option anymore. It will be the only way the majority of Americans will be able to take care of themselves in old age.

Many people will have to keep on working well into their 70s and 80s to afford retirement, according to the study, titled “The Impact of Deferring Retirement Age on Retirement Income Adequacy.”

The news gets worse for low-income workers, according Jack VanDerhei, one of the co-authors of the study. Individuals who earned less than $11,700 per year, the lowest income quartile, would need to postpone retirement till age 84 before 90% of them would have just a 50% chance of affording retirement.

People who grossed between $11,700 and $31,200 will need to work till age 76 to have a 50% chance of meeting the basic expenses needed in retirement. Those who earned between $31,200 and $72,500 will need to work to age 72 to have a 50% chance and those who earned more than $72,500, those in the uppermost income quartile, get a break; they can stop working at age 65 to have a 50/50 shot at funding their retirement.

It’s alarming news to be sure, but can you do to make sure you have enough cash in retirement? Get ready to get sad everybody.

Not working is not an option anymore, and working past the age of 65 is the standard now, not the exception. The lowest three income quartiles will have to begin adjusting their lives accordingly.

The one bright spot, according to John Nelson, co-author of “What Color is Your Parachute? For Retirement” is that working works: “For those in the lower half of the income spectrum, delaying retirement from 65 to 69 has a profound effect,” he said. “It increases retirement income adequacy by 25% to 50%! That’s a powerful incentive.”

The dose of reality that comes with EBRI’s findings is that many Americans are already working past age 65. A recent AARP Public Policy Institute report: “Family Income Sources for Older People, 2009” said that in 2009, 17.2% of Americans age 65 and older were in the labor force.

In addition, about 14.2 million older people (36.7% of the older population) had family incomes from earnings in 2009. The median family income from this source was $32,330, while the average was almost 1.6 times as large — $50,971. You can read the eye opening AARP report here.

The new normal isn’t the fact that people are working past age 65, it’s actually this: They are also hunting for second jobs as well, according to Art Koff, founder of RetiredBrains.com.

“Even those older Americans who are still working are looking for ways to make additional monies,” he said.

Judging from the page views at RetiredBrains.com’s website, many people are often exploring ways to work from home.

And many, judging from the page views at RetiredBrains.com’s website, are often exploring ways to work from home.
 
“Those older Americans who are looking for a job, those who have already retired and those who are working but need additional income or want to start something that they can continue into their retirement years are all reading (the work-from-home) pages,” Koff said.

Certainly, many Americans haven’t come up with ways to make working later an option, instead of a fantasy. Nelson has this advice for them: “You need to pay attention to your career and your health.”

“First, for your career, do some in-depth research and planning. Second, for your body, take a health risk assessment. You may need to keep both of them in shape longer than you thought,” he said.

Committing to working past age 65 is definitely one way to ensure you have enough income to pay for retirement expenses. On the other hand, EBRI also said that Americans who work past age 65, who carry on their savings for retirement in a 401(k) or similar account used for retirement increase their chance of having enough money on their cranky years.

But EBRI also noted that Americans who work past age 65 who continue to save for retirement in a 401(k) or some such account earmarked for retirement increase the odds of having enough income in their golden years.

“One of the factors that makes a major difference in the percentage of households satisfying the retirement income adequacy thresholds at any retirement age is whether the worker is still participating in a defined contribution plan after age 65,” the co-authors of the report. “This factor results in at least a 10 percentage point difference in the majority of the retirement age/income combinations investigated.”
 
The EBRI report can be found here.

What’s your take on retirement? You don’t actually think that Social Security will be there for you do you?

The way it looks right now, the young people will have to pay for entitlement programs without ever collecting them themselves. Get ready to work until you die young people!