Majority Don’t Expect to Retire at 65
A recent poll conducted by CPA Letter Daily asked the question, “Do you think you will continue to work past 65?” Coincidentally, the number 65 came up again.
- Yes – 64.8%
- No – 29.31%
- I don’t know – 5.89%
Approximately 65 percent of the respondents said they would be working beyond age 65. Do that many people love what they do for a living or is there something else happening?
The boomer generation has been the biggest consumer generation ever in the United States. Acquiring things or doing things has come before savings for many of this generation. Saving later rather than earlier has been the norm for most. Couple that with a stock market that has produced a zero net gain over the last 13 years and you can surmise that the boomers do not have enough saved as they approach age 65.
Workers during the past couple of generations often were employed by the same company their whole work lives and were rewarded in the end with a monthly pension that paid them a set amount for as long as they lived. Today very few companies have a Defined Benefit Pension Plan. Most companies have changed to a Defined Contribution Pension Plan which requires the individual to set aside a portion of their own pay to fund a retirement payout. Many companies will match the employees’ contribution in some fashion but most companies contribute only if the individual is contributing. Once again, as spenders rather than savers, the boomer generation has been late to the dance.
The third leg of the retirement stool, after savings and pension, is Social Security. There has been much written lately about the health of the Social Security system and the need for change. What has been a very strong leg of the stool for 75 years is now a little wobbly.
A balance sheet look at those approaching retirement shows another disturbing trend. Many more people are approaching age 65 with a large mortgage balance on their home than generations before. The desire to continually move up or the constant refinancing of the home to buy cars, trips or pay for children’s education has resulted in the boomers carrying large debt.
Is there hope? Boomers who are at the later end of the generation, those currently in their late 40s, have time to change their lifestyle today and save enough to be able to retire at or before age 65. Boomers who are now 60 to 65 and have not saved can’t possibly change enough to have the luxury of retiring soon and will need to keep working to pay off debt and supplement Social Security. Generations X, Y and Millennial can learn from observation. Don’t believe that there can’t be long times of low or no growth in the stock market and extended periods of low returns on fixed income. (We continue to experience that today). Secondly, government and corporations are moving or have moved from a system of support to a system of the individual saving. Lastly, and most importantly, time is the one factor you can’t get more of or renew; start saving early to have comfort later.
Theodore Sarenski, CPA/PFS, President/CEO, Blue Ocean Strategic Capital, LLC. Ted is an appointed member of the AICPA Virtual Grassroots Panel, Social Security Task Force and Planner Magazine Editorial Advisory Board. Ted serves as Chair of the AICPA Elder Planning Task Force and is a liaison to the AICPA PFP Executive Committee.