Posted on | August 28, 2013 | 5 Comments
Previous to 2010, the age that was considered ideal for retirement was 65-years-old, but since 2010 Americans have decided that they need more time and that time has only lengthened in 2013.
When one considers that in 1995, 49% of Americans were adamant that they would retire on, or preferably before, the age of 65, you can see that times sure have changed – a recent Gallup survey (2,000 U.S. adults, 636 retirees) states that only 26% of the American work-force plans to retire by that time. You can learn more at Suncorp by clicking this link.
Statistics also suggest, though, that this change-of-heart within the American people only comes about in mid-life adults, as opposed to younger workers. This is, no doubt, due to an unfortunate reality-check that sets in as we get closer to the ideal retirement age. Jeffrey Jones, the Managing Editor of Gallup Poll, explains, “People who are very near retirement age in their 50s and 60s are looking at their Social Security benefits, 401(k) balance, their cost of living, medical costs and food costs, and have a better sense of what things might be like when they actually retire. They are more aware that early retirement might not be as much of a realistic option for people today as it was 30 or 40 years ago.”
Outside of the reasons that Jones indicated, there are a few others that contribute to the push-back on retirement age, which include:
1. Americans Are Working Longer – Whether they either need to work longer in order to save, or want to work longer simply because they enjoy their jobs, Americans are staying in the work-force longer. A whopping 76% of the American work-force claim that they will continue working straight on past the typical retirement age – 36% stating that they will have to do so and 40% stating that they want to. Out of the adults surveyed by Galllop who stated that they remain in the work-force, 61% intend to work part-time and 15% will stay in full-time.
One of the major factors contributing to the 76% is the level of annual salary – it seems that those that make more are more reluctant to bow out early with 49% representing those who are earning $75,000 or more. This 49% comprises almost the entire 40% who stated that they will stay in the work-force by choice.
2. Medicare Eligibility Plays a Role – For right now, Medicare kicks in no earlier than the month an American turns 65-years-old, so that’s a major part of what set the retirement age initially. Anyone retiring before this age runs the risk of having to opt into private health insurance which results in substantially higher premiums paid. “One of the greatest retirement costs people face, even if they are healthy, is medical care and health insurance,” states Brent Neiser, Senior Director at the National Endowment for Financial Education in Denver, “You probably do not want to get out of a reasonable health insurance situation before age 65, because if you have a gap that needs to be filled, it could be very expensive.”
3. Social Security Retirement Age Increase – With the Social Security retirement age climbing and climbing, it may also play a role in the retirement push-back. It’s true that you can sign up for Social Security at age 62, but you will have your payments reduced unless you wait for your retirement to fully come-of-age. For those born in 1937 or earlier, that age lines up with the preferred retirement age of 65; however, if you’re one of the baby boomers this age has increased to 66 and it’s expected to climb even further for those born in 1960 or later to age 67.
Neiser further elaborates saying, “You are not tapping into the full potential of Social Security if you elect to claim Social Security before the age 66, because it is significantly discounted. Some people might call it a haircut, but that smaller amount adds up to thousands and thousands of dollars less throughout your lifetime.”