Have you ever thought about what retirement means? How much do you need for retirement? Should you buy an annuity?
In the old days, you got a job that was loyal to you and you were loyal to it. You worked for thirty years and put money towards a pension that paid your salary or a portion until you died. Social Security was another way to keep safe during retirement. Both pensions and Social Security are phasing out. But what will replace these resources now that we live longer and need more financial security throughout retirement?
Now, your boss can fire you at the drop of a dime and it’s an unspoken agreement that you might switch jobs and your boss might find someone to replace you. You hear it all the time, someone works at a company for twenty years and gets laid off without the manager batting an eye.
So how is retirement changing today? In this article, we’re going to discuss how people are adapting their approach to retirement. From living longer to finding more ways to supplement their income via private options, the outlook isn’t all bleak. However, private and public organizations need to better prepare the population for the coming challenges they will face in their older years.
So, whether you wonder if a CFO advisory will help you plan for retirement or the types of investments you should set up for your future, you’ve come to the right place. Continue reading to learn more.
What Does Living Longer Mean for Retirement?
The number of people who reach 100 has never been higher. But what does that mean for our quality of life in retirement? Do we have to approach retirement differently than we have in the past?
First things first, although we’re living longer, we aren’t working much longer. We might work into our 70s but an unintentional byproduct of living longer is more years spent in retirement. This means more pressure on healthcare systems and how much these systems rely on federal, state, and local budgets to pay for programs. In less than four decades, the number of people 80 years or older should triple, from 137 million in 2017 to 425 million by 2050.
More people over 65 stay in the workforce and 9.1 million Americans over 65 are working either full or part-time as of January 2018. This number represents a 60 percent increase in just a decade. According to the Bureau of Labor Statistics, many individuals are self-employed without employee benefits.
Increased Financial Fragility
With a much larger proportion of people currently working, it makes sense to question whether the economic systems are in place to support those people. Living longer means more time spent on living. This is especially true for healthcare. If Social Security gets phased out, the supplemental poverty rate for those over 65 could triple.
When it comes to retirement, the numbers don’t lie. Americans don’t have enough to retire. In fact, one report found half the households approaching retirement age had no retirement savings in a defined contribution plan. What’s more, Americans who believe they have enough money to cover retirement or those working part-time to supplement their retirement savings can quickly become financially unstable.
These families can experience detrimental impacts from the following aspects:
- Health status can affect the ability to work longer: improvements in healthcare have solved some of the issues of people working longer. But there’s still a concern for middle-aged people and their health decline. With an increase in diabetes, the percentage of those aged 51 to 54 in fair or poor health has become more common. This concerns those who have to work longer due to not having the correct retirement funds.
- Marital Status Matters In Old Age- Nearly ¾ of men over 65 are married. This is compared to only half of those over 65 who are women. Unmarried women are also three times more likely to face financial problems than married couples.
- Most Americans Carry Debt Longer- The number of adults over 65 with household debt increased between 1998 and 2012. The number of older households with outstanding mortgage debt grew more than 16 percent to 24 percent and the amount of miscellaneous debt, including credit card debt, has grown over time. This increased debt means it’s harder for Americans to establish a healthy financial status for longer periods.
Rethinking Retirement In the Age of Increased Life Expectancy
Perhaps the most concerning aspect of retirement is the possibility of the future. If people start to live until they’re 100, policymakers must formulate safeguards for the healthcare system. And how well does living longer mesh with the strains of society as a whole? If millions of Americans live into their 80s and 90s with little to no savings, what will be the impact on government programs?
If millions of Americans are expected to live well into their 80s and 90s and have little or no savings, or outlive their savings, what will impact government programs? Part of the problem with our current situation is that employers no longer have the ability to provide pensions. However, employers should be willing to talk with their employees about the issues mean for their retirement plans.
Employers should ask questions such as what age the prospective employee wishes to work until, and whether they’ve considered all the costs and some of the best investments to accomplish their retirement goals. Unfortunately for millennials, they could bear the brunt of the shifting retirement environment. With only 5 percent saving fifteen percent of their salary.
Bottom Line- How Is Retirement Changing
The bottom line is that people are living longer and don’t necessarily have a plan for the longer retirement years. Combined with the decrease in government programs and the increased strain on healthcare systems. The future is uncertain for retirees. Both public and private organizations can help solve this challenge by establishing retirement savings options for private workers. The private sector will also have to provide more access to information, products, and tools, to help workers manage their savings.
