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For Retirees, 70 May Not Be the New 65

It’s become common — and comforting – wisdom: Those who haven’t saved enough for retirement can significantly boost their income in their golden years by working until the age of 70, instead of the traditional 65. Not so, counters a study released Thursday by the Employee Benefit Research Institute. “You’re not going to magically be fine if you work a few more years,” said Jack VanDerhei, research director for EBRI and author of the report. / Randy Miramontez

EBRI’s studies often sound a sobering note on this topic (see our MarketWatch colleague Robert Powell’s take on a study from last year: “Many of Us Won’t Be Able to Retire Until Our 80s”). Its latest study is noticeably less optimistic than a recent report by another influential research group, the Center for Retirement Research at Boston College. The center’s report had found that 86 percent of households would be prepared to retire by age 70. That report also found a relatively small gap between the retirement readiness of low-income and high-income households. But EBRI’s report concluded that about a third of today’s households wouldn’t be financially ready even if they worked to age 70.

VanDerhei said that the Center for Retirement Research analysis didn’t factor in the prohibitively high costs of nursing home care, which typically isn’t fully covered by Medicare and is only covered by Medicaid in some cases. His own methodology included the probability of nursing home expenses and arrived at a less optimistic conclusion.

It also projected a much bigger gap between rich and poor: While 90 percent of those making at least $72,500 in annual income would have a 50 percent chance of meeting their retirement income needs by age 65, those making $11,700 and below would need to work until 84 to have the same probability of success. Neither study specifically defines the percentage of working income that a retiree would need to replace to be considered adequately prepared. (In an email, Andrew D. Eschtruth, communications director for the Center for Retirement Research, says, “Different methodologies will produce different results, but both studies agree that working longer will help improve retirement security.”)

Many workers don’t even have the luxury of delaying retirement. In EBRI’s 2012 Retirement Confidence Survey, 50 percent of current retirees reported they left the workforce earlier than planned — because of health concerns for themselves or their spouse, changes at their company or other reasons. The bottom line for workers? “Bite the bullet and save the additional money,” VanDerhei said.

EBRI’s findings weren’t all bleak, however: The study found that workers who participated in a 401(k) plan at age 65 boosted their retirement readiness by 20 percentage points.


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    • Many people do not make enough to save much. Low wage earners if they have a 401K where they work may save some but with market volatility that is a gamble. Savings pay no interest. Other than Social Security which is on difficult times due to mismanagement by Congress. What options have do the working poor have?

    • I believe that the idea of 20 to 40 years of work free retirement is an unhealthy fantasy in many ways. Few have the resources and ability to work for 40 and then relax for 40. Many also loose direction after work & just meander on with out direction; slowly loosing the connections & drive that made their lives meaningful before.
      Today’s jobs are not nearly as stressful on the body as before. While most retirees would not want full time work, there is nothing bad in pursuing part-time work to supplement income. Many retiree’s volunteer (i.e. work for free) when they can to meet new friends, build new experiences, and maintain the drive that keeps people feeling young.
      Many Baby Boomers and later generations will probably need to work part-time in retirement but may also have more freedom in what they can choose. They might be able to do the jobs that they wished they could do when they were younger but did not pay enough before.

    • Every one can retire rich if they work at it. Read ‘The Millionaire Next Door’. The problem is it takes a lifetime of working and saving and not being wasteful to get there. Thrift is out of style, so most people aren’t thrifty. Most politicians think thrift is wrong, because consumption is what drive the economy (or so they think), and they can barely think about next year, let alone the decades it takes thrift to get rich the old fashioned way.

      Also, rich is relative; if it means not having to even know “what it costs” very few will ever get there (and the ones that get there by their own effort don’t act that way in any case). But if rich means being fed, cared for adequately but not lavishly, comfortable and entertained, almost all of us can be that rich, if we work at it, in this country. The questions are will we work at it, and if we do, will be allowed to keep it?

About Encore

  • Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.