Ready for Retirement at Age 65? 70?

A study cited by the Employee Benefit Research Institute (EBRI) cast doubt on whether most Americans will be ready to retire at age 70, let alone age 65. EBRI researcher Jack VanDerhei determined that 90% of workers in the highest-income quartile have saved enough for retirement by age 65 to have a 50% probability of not outliving their assets. Those in the next-highest quartile would have to work until age 72 to have a 50% probability of not running out of money, while those in the third-lowest quartile would have to work until age 81.

If these numbers sound surprising, VanDerhei suggests that previously published data that was more optimistic failed to consider escalating health care costs and disregarded longevity risk.

One strategy individuals can follow to improve their retirement readiness is to work longer. The number of households viewed as being ready for retirement rises 33% when workers who participate in defined-contribution plans (e.g., a 401(k) plan) postpone retirement until age 70. Even if someone does not participate in a plan, 23% of households are more ready when retirement is postponed from age 65 to age 70.

...To continue reading this article you must be registered with AAII.

Gain exclusive access to this article and all of the member benefits and investment education AAII offers.
JOIN TODAY for just $29.
Register for FREE
to read this article and receive access to future articles.

Log in
Already registered with AAII? Login to read the rest of this article.


John Rodriguez from California posted about 1 year ago:

The article mentions saving 8 times ones salary.

Does this mean salary before or after tax - since no or less tax will be paid later?

Likewise if a person saves 10% of their salary, should the 10% figure also be subtracted from the salary before arriving at the 8x total?

Ransom Simmons from Florida posted about 1 year ago:

I find this hard to believe. If, for instance, I finally make 10 million dollars a year, I will need to save 8 million dollars in order to retire comfotably? This is nonsense. No one can spend at a high level and save at the same time unless they are printing the money. So only Obama and Bernanke fit your criteria. If you reach true retirement and your house, car, and other properties are not fully paid for and you are not essentially debt free, then you are not ready for retirement. Also, no one can prepare adequately for the meteor strike from space.

You need to log in as a registered AAII user before commenting.
Create an account

Log In