estimates that people in some regions will have to keep working until 81 years old to achieve the “gold standard” retirement age their parents enjoyed – a full 10 years longer than their parents. Even those willing to settle for a lower standard will have to work well into their 70’s with higher income workers having to work even longer.
The Royal London report showed that workers starting at 22 years old contributing the minimum will have to work, on average, until they are 77 years old to achieve a “gold standard” retirement or replace 75% of income earned before retirement. Even those workers may have to keep their day job into their 80’s. To achieve a “silver standard” of 50% income replacement, people will have to work until 71. The numbers vary by region of the country. Higher income workers will need to supplement their retirement savings through personal savings.
We fret about retirement in the U.S. with state and federal government entities looking to provide more protection to savers and make workplace retirement plans accessible to more people, but our payroll deducted, participants directed retirement systems are well ahead of most other countries who rely on corporations and governments to fund retirement plans. Defined contribution (DC) plans like 401(k)s are relatively new to other countries like the UK which is well ahead of others.
Which doesn’t mean that the U.S. employers should stop trying to encourage more people to save more and invest wisely, but the systems are in place to help and will only get better with greaters fee transparency, enlightened and courageous plan design, as well as aggressive financial literacy education and personal advice. Because, as the Royal London report shows, if people do not have enough money to retire, they keep working, perhaps into their 80’s, which can be a financial burden for companies while hurting productivity and morale.
