Want a better retirement? You’ll have to work longer
Much of the retirement debate has focused on shoring up Social Security, saving the traditional pension plan and getting more workers to open Individual Retirement Accounts. Those all are important discussions, but both a new book and a McKinsey study point out a more promising — if blindingly obvious — path to retirement security: We just need to work longer.
I haven’t read the book, which is from the Brookings Institution and is called “Working Longer The Solution to the Retirement Income Challenge.” The introduction, though, lays out the issue nicely: Pensions are going away, people aren’t putting enough into their 401k plans and Social Security replaces a smaller percentage of pre-retirement income than it used to. To overcome this, authors Alicia Munnell and Steven Sass argue, the average retirement age needs to rise to 66 from about 63 today. That’s not as punitive as it sounds, they say:
Because life expectancy has increased dramatically over the past several decades while the average age of retirement has fallen, working longer does not mean having fewer years in retirement than workers earlier in the postwar era. The working-longer prescription is not about no retirement at all; it’s about beginning your retirement somewhat later.
McKinsey arrives at a remarkably similar conclusion. It cites a statistic that nearly two-thirds of Baby Boomers won’t have enough income in retirement, and then adds:
By increasing the median retirement age by about two years — from 62.6 today to 64.1 by 2015 — the share of unprepared Boomer households could be halved from 62 percent to 31 percent. And the additional workers would boost real GDP growth.
(1 votes, average: 3 out of 5)
Loading ...
David Nicklaus has covered St. Louis business for more than 25 years. His column appears three days a week on the Post-Dispatch business page. 
They are assuming that there will be jobs for these older workers.
See…AB/Inbev, airline industry, auto industry, out sourcing to India etc. etc.
Oh I forgot, we can all be greeters at Wal Mart!!
The financial figures that these studies cite simply reflect the underlying economic realities, the most important three of which are:
(1) The world in general and the U.S. in particular are running out of certain resources that are critical to a high standard of living — the most important of which is readily-available fossil fuel, and also land that is suitable for agriculture, residential, and recreational use;
(2) The per capita availability of these resources is declining even faster because of increasing population in the U.S. and worldwide (and it’s not because of “greedy” oil companies or real estate developers); and
(3) The ratio of “dependents” (children and, particularly, retirees) to “producers” is increasing in the U.S. and elsewhere. (If you are retired and think that you aren’t a “dependent” because you and Social Security are financing your retirement, you are superficially correct and fundamentally incorrect.)
Delaying retirement has the societal advantage of reducing the ratio of dependents to producers (as does having fewer children) and this will be reflected in a higher standard of living for the people who are sufficiently smart and ethical to recognize the advantages of this approach to themselves and to society as a whole.
A BIG qualification is that working longer in life should not and need not require the same level of output and the same pay as during a person’s peak earning years. As a society, we need to recognize, utilize, and pay a fair price for the talents of people who may be past their years of “peak” production, but still have highly valuable skills to contribute to society.
Ted44 - Eloquently stated, you should run for something - I’d vote for you.
So we are being encouraged to jump into the investment world with both feet. Yes, let’s let our employers off the hook for any kind of retirement benefits. The stock market game is not something I want to base my financial future on. Part of the problem with today’s economic situation is that, as corporation board members vote to move our jobs overseas we are expected to like it because, as stock holders, we are benefiting financially. We are being destroyed by our own system.
Thanks to LP323 for the kind words. Not too many people who understand economics can run successfully for office because the remedies they prescribe for economic problems, such as the one the U.S. is facing in energy, involve some sacrifices by practically everyone, and as such are not politically popular.
My favorite political organization is one recently founded by John Danforth and several other moderate Republicans (to overcome the fact that the term “moderate Republican” has become practically an oxymoron). It’s called the Republican Leadership Council, website http://www.republican-leadership.com/
At the rate things are going for us, I’d be thrilled with the thought of a semi-comfortable retirement @ 66. I’m hoping for 70 @ this point — and a healthy 70!