Asking "what is the retirement age?" has changed in recent years. People aged 55 project an increase in retirement age in 2011 than they did 10 or 15 years ago—that’s simply a fact. Interestingly, working later into the golden years isn’t a new idea. According to the U.S. Census Bureau’s 1950 report, more than half of men aged 65 and up remainder part of the work force that year. The decline in retirement age peaked in the 1980s, to about 65 years by 1989.
A Gallup poll in 2011 shows that respondents currently aged 55 plan to retire later, at about age 66 in 2011 vs. age 60 in 1995. A Harris interactive poll reports a retirement age jump to age 69 vs. age 64 in 2001.
The reasons respondents give for an older projected retirement age include the necessity to earn money and employer health, wellness, and retirement benefits as well as the desire to remain physically and mentally active in the performance of desirable work.
In addition, the benefits of an older retirement age include:
- Improved function. Delaying the age of retirement benefits the worker, according to scientific studies. In a study of U.S., German, and French workers, individuals in the U.S. were more likely to continue working past age 65. Of the three worker groups, U.S. individuals showed the highest cognitive function.
- According to Diversified Benefit Advisors, a large benefit advisor firm, about a third of those planning to retire will continue to work in some paid activity. Working until actual old age prevents employment is report by these respondents.
- Time to grow a retirement plan. Adding funds to the retirement plan may be easier now for some Baby Boomers. As children graduate college and become financially independent, parents can add $1,000 a year to an Individual Retirement Account contribution and up to $5,500 to a 401(k) plan.
- Savings rates, remain at close to historical lows. For those without the chutzpah to invest their retirement plan in gold and other precious metals over the past few years, stock market gyrations and other securities volatility has reduced some savers’ retirement funds.
- According to Fidelity Funds, less than 25% of investors aged 55 and over have saved $250,000 or more. With many financial planners recommending retirement savings of at least $1 million, investing money for retirement may keep some people working into their 70s and beyond.
- About 70% of Diversified Benefit Advisors’ study report they will invest a higher percentage of cash flow into a retirement plan, such as a 401(k) between 2011 and 2015. Respondents say they plan to invest $7 trillion, up from $4.6 trillion at year-end 2010, in retirement plans, including 403(b) and 457 assets.
- Respondents of the study anticipate a positive stock market: about 83% said that the Dow Jones Industrial Average will reach 14,000 or higher by 2015. Although the respondents report an optimistic few, almost all respondents want ERISA-qualified investment choices to protect their savings.
- The CBO (U.S. Congressional Budget Office, 2011) says that workers aged 55 plus were least affected by the Great Recession.
- Taxes. Funds in most retirement plans have grown tax-deferred for years. Withdrawals from IRAs and 401(k) accounts must begin at age 70-1/2 for most people, according to IRS. Working for a business in which the individual controls less than 5% of the retirement fund can help to delay drawing down 401(k) retirement assets and paying resulting taxes on those funds.
- Social Security. Everyone understands that Social Security is underfunded—but if you’re confident that Social Security will be around in the near future, delaying Social Security age can add dollars to your future. Declaring a Social Security retirement age of 70 rather than 62 adds money to your future, according to the AARP.
- Government and legislative environment. Diversified Benefit Advisors’ study reports that U.S. government will support the need of aging Baby Boomers to invest in retirement plans. About half the respondents believe that new laws will be passed to grand extended deferrals of investments controlled by Baby Boomers. Analysts of the study anticipate than more than 40% of retirement plan funds will seek qualified investment plans by 2016.
- Current income and benefits. A retired individual may live 20, 30, or 40 years after deciding to retire. Earning current income and benefits stretches retirement funds. Deciding to work part-time or start a new career can add personal interest and enthusiasm to life, too. The world of work adds a social dimension to life that retired people may miss.
- If you’re planning on enrolling in Medicare, you must wait until age 65. In the interim, paying for health insurance out-of-pocket can be a frustrating and expensive exercise. Group insurance coverage reduces the costs of health insurance, especially for older works. If you’ve got a pre-existing health condition, obtaining health insurance at an affordable rate can be especially costly.
The good news conveyed by a variety of research studies says that older Americans understand the reality of retirement planning. The Baby Boom generation understands the need to plan for the future. They also plan for a better securities market and government/legislative support as they age.