9/14/2012 7:43 PM ET|
How high will the retirement age go?
Forget stepping off the employment treadmill at age 65. Lifestyle and financial factors are pushing retirement further into the future.
In June, Robert Benmosche, the chairman of the insurance giant American International Group, said an increase in the retirement age was unavoidable. What surprised many is how high he predicted the age would go.
"Retirement ages will have to move to 70, 80 years old," Benmosche told Bloomberg. "That would make pensions, medical services more affordable. They will keep people working longer and will take that burden off of the youth."
Currently, Americans are eligible for early retirement at 62, and full retirement at 66. The loss of retirement funds during the economic downturn forced many to acknowledge that they would have to work longer. But Benmosche's statement shocked many. Will people really have to work a decade or more longer than they expected to make ends meet in retirement?
The answer is yes, according to some retirement experts. A number of factors, accelerated by the Great Recession, are now forcing people to change the ways they save for and think about retirement.
"Most people didn't have enough retirement savings before the downturn. The downturn was the two-by-four hit over the head that made them realize this result," says Steve Vernon, the president of Rest-of-Life Communications, a company that helps people adjust the way they save for their post-work years.
Never completely retired?
The U.S. government has already acknowledged that the official retirement age will need to increase further than the already-revised 67 years. But doubts about the long-term solvency of Social Security linger. And the need for retirees to find funding beyond the government entitlement is making the official age obsolete anyway.
"The idea of retirement is morphing into a period of time where you work for an extended period, perhaps not making as much money or as many hours, but you still bring in money and keep going," Vernon says.
He says there are two primary reasons for the change:
- Workers don't have enough saved to meet their needs after they stop working, so they need the additional income.
- People are living longer and want to be more engaged with life.
Todd Tresidder, a financial coach and founder of FinancialMentor, calls this shifting reality the "new retirement," which calls for people to continue producing income while allowing a retirement nest egg to grow.
"We added a whole new step in life. We're going from a two-step model -- save while working and then live off the savings -- to a three-step model," Tresidder says. In the new model, "You work like a dog, save a nest egg . . . you reach some point of 'enough-ness' when you're comfortable with the amount you have saved. Then you launch an encore career. You orient it to a satisfying life. You make enough to allow your income to compound. You run this lifestyle for fulfillment. You shorten the time that you use your nest egg."
How high can it go?
But the question remains: How long will someone have to continue working to achieve a secure retirement? Unfortunately, it's impossible to answer conclusively, because it depends on individual circumstances and needs.
According to Vernon, this change will happen to all workers, not just those in lower-income brackets. Even people with healthy retirement savings likely don't have enough to maintain their lifestyle. This shift is also occurring in other industrialized nations.
"Workers in industrialized nations that have transitioned away from traditional pension plans will be forced to work longer. Examples include the U.K. and Australia," says Vernon. "Other countries with higher Social Security benefits are taking longer to transition, such as France, Spain, Italy, Greece and Sweden."
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Polls indicate that Americans are beginning to accept that these changes are coming. According to a recent Gallup survey, most Americans now believe they will have to retire at 67, up from 66 last year, 63 10 years ago, and 60 in the 1990s.
But the poll also shows that people expect the increase in the retirement age to be small. According to Vernon and Tresidder, this isn't the case: People are going to be forced to work into their 70s very soon.
Tresidder says this change does not have to be a bad thing. People can work in fields that engage them and provide personal satisfaction. Just because a person's first career was a grind doesn't mean the second one will be the same.
"People are really embracing (working later in life) because it's really about fulfillment," he says.
More from U.S. News & World Report:
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It always surprises me that these discussions talk about what will or should happen by only discussing the financial need. What I seldom see discussed is the state of people's health and how that will impact the retirement age. While we are living longer, I don't think we're getting as many additional healthy productive years as we are just total years, at least on average. How many people will be in good enough health to work well into their 70's?
I'm 59 and out of work. I can't find a job because they say I'm to old. I have a degree and my last job was for 13 years. Do you realy think anyone is going to hire a 70 year old?
The last line in this article states, " People ae really embracing ( working later in life ) becasue it is about fulfillment " Now look at the picture of the man at the top of the article. Oh, he really looks fulfilled doesn't he. What a crock. People work all thier lives so they can enjoy their retirement by doing things that were not able to do during their work life. Now, and I do agree that people are going to have work longer because I am one of them, and that we accept it because it is a fact of life. Don't pea on my leg and tell me it is raining. We are going to work later in life becasue we have to EAT and pay electric and gas and ........ Fullfilment my a--. ' "People are embracing( working later in life) because it is about SURVIVAL.
Lets face it they would rather see us "DEAD" than have to pay it to us.
But as I say what is good for the "Goose" is good for the "Gander". We also need to cut "Government" "Entitlements" we / you and I pay out thourgh our TAXES that we PAY !!!!!!
Social Security is NOT a welfare entitlement. We have worked our entire lives paying into the fund with the promise that it will be there when we reach retirement age.
For many people, Social Security is the only thing that they will have to retire on. Take that away and you will have total anarchy. I for one will not roll over and say "OK, thats just the way it is." I will do every thing that I can to burn this country to the ground and believe me, I'm not the only one that feels that way.
People used to plan for retirement with the 3 pronged leg of income, S.S., savings and investments.
They could calculate their lifesytle from those 3, taking interest earned on their investments...so they had a safety net for inflation and the chance to leave principal investments to their heirs.
That has all changed. Now, you must figure how much and how long your investment (401K) will last before depleted in principal and then the house gets sold or is left for the heirs.
Quit calling S.S. an entitlement. The government took the funds, spent it on promises to everyone for everything and now it is time to pay it back. That will mean that government employees in the House and Senate and Executive branch will have to work for free to honor their promises. This problem was caused by them and we will have them pay the piper for their institutional blunders. They ( government officials) have a lesson to learn, not the prople who played by mandated rules.
I have a question, with unemployment staying high, and it doesn't seem it will be changing to quickly I am confuse about how easy it is to just keep your job as we are lead to believe. I was let go after 17 years of employment because of restructuring, I have been unemployed and underemployed for 5 years. I was at the top of my scale working hard and doing an excellent job according to performance appraisals. I am in my early 50's with experience and can not find a job, I don't even get call backs!
So what is one to do? If I have to work for 20-30 years, where do I work? Will I get a job soon? So far it doesn't feel very good. Starting a new career doesn't sound like it is a promising option. I will then be an older worker with no work experience in a new field. I believe a young person with a little experience seems the most likely to get the position. They are faster, more tech savvy and have more year to work and may stay with the company for a long time. It sounds a bit like age discrimination, something I didn't believe but now I am living it.
So what is the average wage for someone over 55 and have changed careers, has been "unemployed" for 9-10 years making $75,000 before being let go, and they just change careers? How often are these types of workers let go from their new job? Then what have they been choosing to do until they hit full retirement age?
Haven't seen any articles addressing this issue. Has anyone else????
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