Image: Senior man looking sad © George Doyle, Stockbyte, Getty Images

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."

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.

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