The Future of Retirement

Updated : Sep 05, 2019 in Articles

The Future of Retirement


Hello, and welcome to Your Money 2.0. I’m Thomas Fox, Community Outreach Director
of Cambridge Credit Counseling Corp. The fragile economy has made it necessary
for many of us to rethink our financial plans. Over the last year, just about everyone has
started saving more of their income, adjusting their spending and paying down their credit
card debt, and some people have even relocated to more economical housing. Now, a new Gallup poll indicates that another
concern is growing out of our Great Recession – retirement. The Gallup organization first questioned Americans
about their expected retirement age back in 1995. Since that first poll, there has been a dramatic
shift in results. In 1995, a majority of respondents indicated
they would retire before age 65; however, the most recent poll shows that more than
60% of American are intent on retiring at, or beyond, age 65. Although the shift in expectation is substantial,
we really should not be too surprised. Over the last few years, we’ve come to the
realization that Social Security alone will not provide enough to live on – that is,
if it’s still around. (Don’t worry, it will be, but the program
could use some work.) At the same time, fewer and fewer Americans
have a traditional pension plan waiting for them at the end of their working years. And the dim prospects don’t stop there. Overall, just about every saving, investment,
or income-boosting vehicle used for retirement has been performing poorly. 401(k)’s and other retirement savings accounts,
home equity, part-time work, savings accounts or CDs, stocks or stock mutual fund investments,
annuities and insurance plans, inheritances, rent/royalties – each of these traditional
resources has struggled recently. Retirement accounts and other investments
have been greatly impacted by the stock market’s collapse, and are only now showing signs of
recovery. Savings account interest rates are at historic
lows, and we don’t need to get into the housing market. We’re going to need to re-examine our expectations
– take a good, hard look at what we want our golden years to be like, and create a
plan. For many of us, even though the outlook is
grim, retirement is still not out of reach — depending on your version of retirement. For instance, will your lifestyle change in
retirement? Or will you remain active through part-time
work and volunteering? Will you incur more expenses in retirement
for leisure and travel? Or will you prefer to spend more time with
your children, grandchildren, and family? Are you even ready to retire? Or would you miss the camaraderie of friends
who are still working? These questions are important, since they
have very real financial implications. Many financial planners recommend that the
average person set aside 65% to 75% of his or her annual pre-retirement income to survive;
however, your goals could mean you need more, or less, than that amount. There is also some good news that we should
acknowledge. If workers remain employed beyond the traditional
retirement point, it could be a boost for the American economy. The longer Americans work, the more they contribute
to the economy as a whole, through both taxes and consumer spending. Working longer may also help improve our financial
situation, since we’ll be able to build bigger nest eggs. Also, you can receive higher Social Security
benefits by collecting benefits later on in life. The calculation of Social Security benefits
considers your earnings history and the age at which you choose to begin receiving checks. Motley Fool.com has a great example of this. If I were to work until age 62, earning $60,000
annually in my years leading up to retirement, I would receive approximately $13,900 in benefits
each year. However, if I waited until “full retirement”
age, the annual benefit would increase to about $19,600. Better yet, if I postponed receiving Social
Security until age 70, my annual benefit would increase to approximately $27,200. That’s a big difference for just a few extra
years of work. In the end, working longer may not be bad
for us or our economy, providing we do the best we can to refine our spending and save
appropriately. Well, that’s it for this edition. As always, we welcome your feedback and ask
for your thoughts and suggestions by e-mailing us at [email protected] Thank you for watching. Until next time, I’m Thomas Fox for Cambridge
Credit Counseling.

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