Observations on life

Here’s the Typical American’s Retirement Age. How Will You Compare? — The Motley Fool

There are still many naive people out there with a plan, nay dream of retiring at age 55 or when they complete the required  minimum years of service – think public pension plans. Retiring in that case usually means collecting a pension from a good job and then taking a job doing low skill work for somebody else. 

Still the typical retirement age is 62 and together with collecting Social Security plus the amount saved for retirement, the typical worker will be just … screwed 😳

I’m not sure why we keep talking about this retirement dream because nobody seems to be listening. Employers have abandoned pensions, the government keeps putting out one new retirement saving plan after another, even at the state level … we are virtually trying to force people to save and too few are paying attention. 

And NO, in the majority of cases it is NOT because they can’t afford to save, it’s because of what I call the hierarchy of affordability. The list of what people can afford is long and at the  bottom  of the list are retirement savings and health care expenses … and that’s the truth like it or not. Pass that along to the liberals and socialists who bemoan the beleaguered middle-class. 

Not only aren’t people saving adequately, they have no clue about investing for growth, using their money in retirement, planning for survivor income or their expenses in retirement; most notably health care expenses. They are generally oblivious to those pesky problems of inflation and longevity. 

Even for more realistic individuals looking to retire at 65 or latter, the trip can be bumpy because you simply don’t have control over all factors that may shove you off the road. It seems the key is to plan to retire at 70 and “plan” to retire much sooner. 

Plans vs. reality The typical (in this case, median) American retired at 62, according to the Transamerica Center for Retirement Studies’ survey of American Retirees and pre-retirees.

Workers aged 50 and older are planning to retire a little later in life, at a median age of 67, according to the same survey. With the shift in Social Security benefits to a later retirement age, and with the demise of traditional pensions (meaning the average American has to do more personal saving for retirement, something we as a country are well behind in), it makes sense that people would be waiting longer to retire. But there’s only one problem with that: Retirees had planned to retire later than 62, too.

In fact, 60% of current retirees retired sooner than they’d planned, according to the Transamerica survey. And of that group, only 12% retired because they believed they had enough money for retirement (and, to be fair, another 4% because they received a windfall, such as an inheritance). Twenty-seven percent retired because of “organizational changes at my place of employment”, 27% because of ill health, and 26% because they lost their jobs. Don’t assume you’re immune.

The conventional wisdom has been that blue-collar workers are disproportionately affected, as aging makes it more difficult to perform demanding physical tasks. The assumption goes that those workers are more likely to be laid off as they become unable to perform daily at their jobs, and that white-collar professions are largely insulated because of the lower physical demand. However, new research out of the Center for Retirement Research at Boston College shows that it’s not that simple. The study calls out a number of non-physical abilities that also decline well before full retirement age. Here’s an example, quoting from the study:

‘[F]luid’ cognitive abilities, such as episodic memory, working memory, and reaction time — which people need to acquire new information and make decisions — steadily decline with age starting in one’s twenties or thirties.

Source: Here’s the Typical American’s Retirement Age. How Will You Compare? — The Motley Fool

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8 replies »

  1. More bad news. A new report by the FED shows debt held by 50+ increased 59% since 2003. I owe, I owe, so off to work I go. My sister is delaying her retirement 12-18 months to get out of debt. She will be 69. Se did start her SS at 66 to help her pay down debt. Debt will be one of the biggest reasons to delay retirement in the future.

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    • Not necessarily bad news, according to the NY Fed and their 4th quarter 2015 report on debt, there has been a deleveraging across America for almost all ages except older folks over age 65.

      Increased debt, change between 2003 – 2015, includes an increase of $11,191 (47% increase) in home secured debt, -$11 (no change) in credit card debt, $1,102 (29% increase) in auto loans, and $857 (886% increase) in student loan debt.

      So, net change was ~$13,000 increase – HOWEVER, it should be noted that the increase was apparently fully offset by increases in assets.

      This is simply the aging of the baby boom generation, where more so than in the past 20 years, people are working past age 65. For example, in just 17 months I will make my way into the age 65+ group, where I will add considerably to the outstanding debt, but, where my assets are 10+ times my outstanding debts.

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      • I believe after living the last 60 years, the high debt load is a sign that price inflation has created a credit bubble. When I had my first job, in 1971 most people used credit only to buy a car or house. Now they use credit to maintain the illusion of a middle class standard of living. Many people do not have assets 10+ times their outstanding debts. I know quite a few that have a negative asset to debt ratio, after the housing bubble. But they are holding on, hoping their housing value recovers.

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      • There may well be a “credit bubble” – whatever that is.

        However, the changes in debt among those ages 65+ are modest (using the 2003 – 2015 Fed data). As I noted before, the changes in debt among the elderly are much more likely to reflect a change in the composition of individuals age 65+ than a change in debt patterns – as the baby boomers age in, and as retirement preferences change. I can only look in the mirror and at my siblings for examples – I will be in the age 65+ group in less than 18 months, bring with me a much higher than average debt load, but with dramatically greater assets that more than offset any outstanding debts. I also plan to buy (and finance) a home purchase as part of a relocation, that is off in the near future (even though I could easily pay cash).

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      • For me and my spouse, not much. Elected a 100% CA from DB pension. She deferred payout of her DB pension. We have yet to claim SS – even though I am fast approaching age 64.

        For other Baby Boomers, again, the New York Fed data suggested that the average net worth of those age 65+ increased,, between 2003 and 2015, because while debts were greater, assets were even greater. I suspect, like everything else, some are in trouble and others are not – when it comes to financing retirement and providing for survivor benefits.

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  2. Sorry, the only reason “average” retirement age in America has not increased is the economic malaise since 2009 – where so many older workers have left the workforce, and, with little other choice, have claimed SS starting at age 62.

    The last time I was in a plan sponsor role, ending in 2010, it was clear that workers who had continued employment had started to delay retirement decisions – particularly as more and more employers eliminated early retirement subsidies.

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