According to the Centers for Disease Control and Prevention (CDC), on average, US residents can expect to live to about 78 year of age, which is an all-time high. Studies and polls suggest that the life expectancy of women is approximately 81.2 years whereas those of men is about 76.4 years.
According to experts, when a person lives longer, they will need more money in that accumulated account to be able to provide the same amount of monthly retirement income. For example, a retirement account of $120,000 will be required to generate $10,000 each month for 10 years; $240,000 will be required for 20 years.
Inflation also greatly impacts future income. For example, let us assume the 30-year historical 2.62% inflation rate: in 10 years, the current $1,000 would need to be $1,295 and in 20 years, $1,676. This means that retirees are not only living longer than their predecessors, but more money is also required to meet their needs; Cell phones, Internet, clothes, and so on, it all adds up.
There was a time when retirement meant collecting your last paycheck when you turn 65, saying goodbye to your colleagues and permanently closing the door to your working life. But not anymore. The last two decades have seen a steady increase in the number of people who have continued to work after 65. The reason is not necessarily the need for money, although this is true for many people – it is because society has changed. More women are participants in the workforce, and they are staying in it longer as well.
Today, workers are better read, informed, educated, and healthier. It is also a known fact that most jobs too are less strenuous which paves way for more people to work way past 60, and they are willing to do so. Today, the very definition of the word ‘retirement’ has changed. Instead of retiring altogether, a lot of older workers are moving out of one career and into another.
A Bigger and Better Pension
If you are fortunate enough to have a pension, and it has not been frozen, working a few more years may give you a bigger payout. Pensions are calculated based on years of service and pay. Some retirement plans decide or calculate your pension on the basis of your last 3-5 year’s average employment earnings, others on your average earnings over all the years in which you have participated in the plan. If your income is still continuing to rise, you could be getting a richer pension benefit with every added year that you work.
Cost of Health Insurance
Experts say that health care expenses can put a lot of strain on a fixed budget, and this is another reason most workers will need to work past 65. They simply cannot afford to leave the benefits that work provides. Many employers cannot afford to extend retirees with health coverage since it is too costly. Even among healthy seniors, there is a concern that their expenses related to medical care may be more than they can afford in a few years, while they also try to cover living expenses for the rest of their lives.
This is certainly the case with the ACA. ACA has increased health care costs on all responsible Americans and perhaps even limited the amount of people who even want to become a doctor. Moreover, there are genuine concerns in America now that are our own doing. On top of this, Social Security (SS) is broke. The numbers do not add up, so depending on your age, you may not want to assume Social Security will be there for you.
We will speak more about SS right now…..
A Higher Social Security Benefit
The full SS retirement age was once 65; it is now 66 for those who were born in 1943 to 1954, and gradually, it will increase to 67 for those who were born in 1960 or later. But when you delay claiming the benefit past the full retirement age, you become eligible to receive an annual benefit bump of 8%, until the age of 70.
If you are healthy and anticipate an average life expectancy – 82.9 for men who reach 65, and 85.5 for women, waiting until age 70 to collect the bigger benefit makes more sense, particularly if you have a spouse that a boosted survivor benefit can help. But that means that you need to come up with another plan for expenses coverage during the interim. With a paycheck, you make sure that the money keeps flowing in.
According to the 16th Transamerica Center for Retirement Studies annual retirement survey of 4,550 full-time and part-time workers, it was found that 51% plan to continue to work into retirement, even if it part-time. And what are the major motivations to continue working that 61% of respondents cited? Those motivations are income and health benefits.
In almost half of working households, there is an absence of any type of retirement. Also, among workers between the ages of 55 and 64 who do have a form of retirement, the average balance is $100,000. Along with too much debt, the cost of medical care and health insurance means that the majority of workers will need to work past the age of 65 to live decently.