Workers are now retiring at older ages because the incentives to retire have changed. Since the mid-1990s, the average retirement age has risen from 62 to 64 for men and from 60 to 62 for women, according to a new Center for Retirement Research at Boston College analysis of Census Bureau data. The trend toward later retirement has been driven by declines in traditional pensions and retiree health benefits offered by employers, changes in the way Social Security benefits are calculated, better education and health, and less strenuous jobs that people are able to perform at older ages.
Fewer workplace benefits. The shift from traditional pensions to 401(k)s made retirement a more risky prospect because retirees must manage their investments and control spending on their own. The decline of employer-provided retiree health insurance gives employees an additional incentive to keep working until they qualify for Medicare at age 65.
Greater longevity. Individuals are now living longer, which is more years of retirement that need to be financed. Working a few years longer gives workers more time to save and shortens the period of time they need to pay for. Many people in their 60s are also healthy and able to work, especially now that many American jobs are knowledge-based rather than manufacturing positions. People with more
education tend to work longer. Recent studies show in 2011, nursing home care topped more than $87,000 per year and home health care was even more. Thankfully there are alternatives to traditional long term care policies that bundles this coverage with annuities. If you’re at the point in your life and you’re unable to qualify for long term care insurance, annuities with a built in long term care option are probably a great option for you.
Social Security changes. The Social Security formula has been changed to make working longer a better deal. The earnings test, which temporarily withholds Social Security payments for people who earn above certain limits, was removed for workers above full retirement age. For most current workers, the full
retirement age is 66 or 67. There is also now a delayed retirement credit, which increases benefits for each year of delayed claiming between the full retirement age and age 70. A recent report of the social security system show that the funds will be exhausted by 2033, three years earlier than previously
forecasted. Medicare trust funds is set to run out of money in 2024, after which they will be able to pay only 87% of scheduled hospital benefits to retirees. Even if Medicare is repaired, an average couple retiring at 65 will need to set aside from $230,000 to $271,000 just to pay for medical costs (this includes Medicare and MedSupp premiums). This is assuming a life expectancy of 85 for women and 82 for men.
How does one make up for that possible loss of retirement income? What type of plan do you need to ensure you have enough to cover your expenses? These are important questions to consider, no matter what age you are. With defined benefit pension plans falling by the wayside, more investors are turning to products that act as pension substitutes. We have products, similar to pension plans, which provide a lifetime of income or death benefit to your heirs, depending on your goals.
Contact us today to learn how you can take control of finances for a worry-free retirement.
If you need further assistance my firm, Complete Financial Solutions, Inc. specializes in retirement planning. We have locations in Raleigh, Fuquay-Varina, and Wilmington. Give us a call @ 1-888-316-6232.