Prepare for a rise of seventy-somethings in the workplace.
Can you expect to see your employees retire at 65? That is a common expectation, but keep in mind that for those born after 1960 the Social Security (full retirement age) is 67. In 1935 when Social Security was first presented the full retirement age was 65. Life expectancy back then was 64 for women and 60 for men. The odds were clearly in favor of the system back then.
Individuals are living longer, healthier lives.
Despite nudging the full retirement age higher by a few years to 67, the average life expectancy has relatively sky-rocketed to 79. Additionally, the number of people living to 100 is also rising rapidly. It is simple arithmetic to understand why the Social Security program is facing a crisis…and may not survive in its current form, leaving a generation holding the bag in retirement. This will lead to a whole lot of seventy-somethings clinging to the workplace.
The numbers don’t lie, a retirement crisis lies ahead.
According to the US Government Accountability Office (GAO) those with retirement plans are woefully underfunded. Median account values for households ages 55-64 were $104,000 and $148,000 for households age 65-74. Not quite enough for a two or three decade run. Even if the full Social Security benefit is available, that averages approximately $1,231 per month. Studies have shown conclusively that expenses do not decline in retirement, especially since retirement-age individuals are enjoying a higher quality of life into twilight years.
Working into your 70’s?
With many individuals unprepared (underfunded retirement plans), the only real option may be to work beyond 67 years old. The numbers tell the tale, and if Social Security benefits get cut or altered, the squeeze could be exaggerated. Plan sponsors should take note that this is an inevitable fact and not a speculative trend.
Two things plan sponsors should keep in mind are: 1) focusing on those underfunded accounts in 50+ year-old employees to see if they can increase savings; and, 2) planning for workers to stay on several more years.
