Ready for Retirement at Age 65? 70?
A study cited by the Employee Benefit Research Institutecast 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.
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