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
So I'm paying for my grandmother in law who never worked a day in her life to collect 35 plus years and still going strong but I'm expected to work until 80?
No, I will continue to save for my retirement and get out of the rat race, in spite of having money pillaged each pay period.
I retired at 59 because of health issues. If I am denied health care under Obamacare just remember "You don't have to be a weatherman to know which way the wind blows." Does anyone remember the weathermen and what they did for protests?
There was never any way that all the boomers could retire well at 65 or any age close to that. There are just too many of them and too few young people to support them.
There is nothing but IOUs in the SS & Medicare trust funds. For all of (us) boomers who feel entitled to a comfy retirement because we paid entitlement taxes, we should start feeling entitled to a lousy retirement because WE not just allowed, but we DEMANDED that the government spend that money buying our votes from us. Not only is all the trust fund money spent, but we've spent another $16 trillion more.
But even if there were zillions of dollars there, when if we tried to spend them, we'd find there's nothing to buy, unless we confiscate a huge fraction of the production of the young. You can save all the "money" you want, but you can't eat, wear, drive, or cure your illnesses with money. You need someone else to provide those services. There aren't enough young people to provide those services.
The only way the boomers can retire well is if the young pay oppressive taxes.
Thanks to Obama's "print, spend and borrow" monetary policy, prepare to get screwed by the Government (again). The Government is already priming you to expect less from the Social Security fund you've been paying into.
And that's not even the tip of the iceburg. Don't count on Food Stamps, Snap, Medicare, Medicaid, Obamacare, Government subsidized housing, student loans and home loans - theyre all in the same boat. That's the reality of the balooning Obama deficit.
But hey, who cares. Obama is doing such a great job - thats all that matters...go ahead and give him four more years!
I worked for almost 22 yrs and no longer working for about two years with an annuity that will be cut in 1/2 next year, and next year I could start early retirement. Within the last year I have applied for jobs less stressful that I qualify for but I get notice that they are impressed with my credentials but they decided to go with someone that matches more to their needs.
I keep being told by many including job service that employers do hire and like having older, dedicated, experienced people, but I have yet to feel that is true. I thought about getting another degree to add to my prior education, but I would have to do testing of math of algebra and diagrams I have not done in years to qualify a program. Then would I want to go into debt, again and would I be the only person in my 60's, and would I really be hired .... I do think my age is affecting being hired.
I realize the economy is bad and there are many out there looking for work. Personnally, I believe if Romney/Ryan win the election there will actual business sense implemented and jobs will be slowly recover. Currently, it appears older people are being cut out.
There is an ad on TV that shows a woman walking saying, I am in my sixties, I have long life ahead of me, I have plans ..... (I do not recall the type of commercial, but I think of work and education, how that could apply).
I would like to add that the news about these people in California and the Federal Government and their waste and selfishness and inflated income, working and retired. These people especially those who have abused their office need to be penalized and jailed and lose their pensions. I sure would have liked to earn over $500,000 yr for income. Although, my income was 6/10ths of that income but still considered a good income compared to the regular employee and determined by commensense policies to keep wage competitive.
Well, I will keep on ...
And who the hell is going to be Mentally & Physically fit to work til 75? I know I won't physically for health reasons.
Take the "burden" off the youth? Who the hell is bearing the burden of those collecting now? Us the Legal, Tax paying Citizens.
I believe we should be able to sue for the Government promising we'll collect what we pay in as it will be there waiting for us. Instead they're robbing citizens to pay for illegals, and the Legal working citizens to finance the panhandlers, welfare lazy & illegals. That's fraud & embezzlement!!
Are you people serious? I know a lot of people who lost their jobs once the financial market crashed. They were all in their early 60's. Do you think they will be hired again? NOT! All the on line job search engines are designed to weed them out before they ever get a chance to interview. When did you graduate college? High School? Too old, trash barrel.
So they spent their money on raising their kids and their kids college tuition, etc. Had their retirement funds, stolen or lost and now can't get a job at McDonalds. SS is all they have left after paying those years of debt and health insurance
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