By Glenn Ruffenach
Yes, working beyond your planned retirement date might be the best way to secure your financial future. But you might not have to work for as long as you think – or fear.
A new study from the Center for Retirement Research at Boston College looks at how much longer households have to work beyond age 65 to be prepared for retirement. The finding: Over 85% of households would be prepared to retire by age 70. Put another way, many Americans – who now fear they will have to work “forever” – could enter retirement after working between one and six years beyond age 65, depending on the size of their nest eggs.
“The results paint a different picture than recent opinion surveys, which find that people anticipate that they will have to work much longer,” the report states.
The study is titled: “National Retirement Risk Index: How Much Longer Do We Need to Work?” The National Retirement Risk Index measures the share of U.S. households “at risk” of being unable to maintain their pre-retirement standard of living in retirement.
Currently, in the wake of the financial crisis of 2008-2009, just over half – 51% – of today’s working households are at risk, according to the center. But an important assumption in calculating that number is that people retire at age 65. If people were to work longer, the percentage at risk would fall. Thus the question, as outlined in the report: “At what age would the vast majority of households be ready to retire?”
By estimating target “replacement rates” (retirement income as a share of wage-adjusted lifetime income) and calculating the “age of readiness” (the age at which a household’s projected replacement rate equals its target replacement rate), the center estimates that:
- 23% of U.S. households would need to work one to three years beyond age 65 to “attain readiness” for retirement;
- 17% of households would need to work four to six years beyond age 65;
- 9% of households would need to work seven years or more.
While the numbers suggest that “today’s workers will need to work longer than their parents,” the study concludes, workers today “are also healthier and better educated, generally have less physically demanding jobs, and can expect to live longer. In short, working longer is feasible for most households, and it does not mean working forever.”