Retirement Revisited

May 30, 2009

The average retirement age in the United States was 70 in 1950, 66 in 1970, 63 in 1990 and approaching 62 recently. Enter the economic crunch of 2008-2009.

According to a recent study conducted by Harris Interactive for Age Wave, people not yet retired think they will need to postpone their retirements by an average of 4.2 years.  So we could see the average retirement age increasing substantially for the first time in decades.

Even more to the economic point, a majority all groups in the study except for “Millennials” (age 21-32) lost money in mutual funds, 401(k) plans and/or the stock market over the course of the prior year (the study was conducted in March, 2009).  And, on average, study respondents believe it will take them about seven years to return their investment portfolios to what they were worth a year earlier.

Could the news get worse?

Yes.  According to the study people over the age of 55 are even more concerned about uninsured medical expenses than they are about retirement income.  We can work longer to build up or rebuild our retirement nest egg but sudden loss of health and the need for prolonged care can burn through assets very quickly.  If you are very affluent, you probably have the resources to cover significant medical costs.  If you have lower income, you may well be covered in large measure by Medicaid (although you may still lose significant assets).  If you are in the middle, long term care insurance may be appropriate if you afford it.  But much is uncertain.  The train of upward spiraling medical costs and entitlements is hurtling down the track to the Town of Reckoning.  We are in desperate need  of a few good and selfless statesmen and stateswomen in Washington to rise up above the usual political morass and provide leadership toward a real and long-term solution in the best interests of everyone.

Is there any good news?

Yes.  The most important lesson study respondents say they take away from the experience of our recent financial challenges is the “need to live within your means.”  Another way to characterize this is to strive to live within our “financial comfort zone.”   We need to support our lifestyles with the real financial resources available to us and not with excesses of real estate and credit card debt.  If our desired lifestyle exceeds our financial resources we must either rein in our lifestyle or add to our resources.  This of course seems quite commonsensical but many people lost touch with it during times of (unrealistically) easy credit.

More good news: savings rates at over 4% are almost double what hey were over the last decade and household credit card debt is down almost 10% from a year earlier.  This isn’t the result of people reaching out to the federal government saying “Save me, save me.”  It is the result of people taking a good measure of the situation and acting to put their financial houses in order.

Age Wave has always been very supportive of an engaged approach to retirement which is what this blog is all (or at least mostly) about as well.  If you would like to read the full Age Wave report, you can find it at Point.pdf

R. Kevin Price

© 2008-2009 R.K. Price