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."
- Calculator: How much will your 401k provide?
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:
VIDEO ON MSN MONEY
80 years old! Hahahahahahahahahaha!!!
Might this be considered an admission of guilt (evidence)in the not too distant future, which, BTW, ain't what it used to be? (still laughing)
Ha! Ha! The best medicine. Laughter.
Oh and money can't buy you love, either..
Part of the problem is Social Security was supposed to be insurance, not an automatic entitlement. There are a lot of people collecting who are not in need of it. We need a means test.
The other part is you! Too many folks posting here think their favorite party has their back and the 'other' party is out to get them. Personally I don't trust any of them - they think they're playing with Monopoly money.
I suggest everybody do a Google or Wiki search and see who has held Congress whenever there have been reductions in benefits or increases in SSN witholdings from your paycheck. Don't let somebody else think for you.
And we thought Bernie Maddof was bad! Ponzi scheme of sorts? Right there with Enron and WorldCom. Now they are planning to tell you to work till you are 70 - 80. What's next...they are going to tell you when you are going to die!
we can thank our government for this-they have taken our funds and paid them to the asian immigrants of the 80's & 90's. they paid them $700+ per person in the household,full medicare benefits,full prescription coverage 100%-cheaper rate of interest on home loans(lower than the american average). they raped the ss funds and we,who were born and raised here and have worked and paid into this fund for 40+ years now have to suffer, whille the other get our money
I feel all government officials should that a 40 % pay cut ,put that money back into ss funds were it belongs and take the immigrants off ss which they never paid into in the 1st place. the people of this country never voted to allow the redirect of ss funds,which did not belong to the government.
@ 71 years of age..... i guess im not real smart, BUT. PER THE NEWS MEDIA UNEMPLOYMENT IS AT AN ALL TIME HIGH??? = NO LIVING WAGES TO BE HAD?? = govt cant wave a magic wand and make it 'BETTER'???.... and they want to RAISE THE RETIREMENT AGE??? = CHOP SSI & MEDICARE????? ..... I SMELL A SKUNK IN THE WOOD PILE HERE! = GOVT IS IN DEEP CACA....THE PEOPLE 'W H O'?????
Has anyone bothered to even read this article? They are calling it "government entitlement." Like we didn't even put any money into it. Our problems all started when they started deregulations. The Banking industry is out of control. The government took our SS money and were supposed to put it back, but never did. Companies from other countries have been allowed to buy up and/or take over American Companies. Conglomerations were illegal. And it is no ones fault but our own. We allowed them to walk all over us. So now what are we going to do about it?
Probably nothing, just sit back and complain as always.
Can I get some cheese for all the whine? People do not know how to sacrifice and take care of themselves. We also do not teach finace/economics in high school so workers can make better decisions in life. I plodded through and got college degre by 31. Went 10% salary down into my 401k at 31 when I got first job out of college. At 55 got $500,000. Going to have $1,000,000 by 62.
Work, save don't spend like TV says.
AIG----retired on the backs of its customers...and they are going straight to H E
L L no return with their bailout scam --how dare they even show their faces...
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Some workers lose up to a quarter of their paychecks paying off old debt from credit cards, medical bills and student loans, as well as child support.