5 Ways American Retirement Is Changing


Somebody once said, "Retirement can be a great joy if you can figure out how to spend time without spending money." And because of the ever-rising cost of living, this quote is more true than ever. The whole concept of retirement isn't what it used to be, and retirement planning sure isn't, either.

Just like you can expect to require a higher goal for your nest egg for a comfortable retirement, you can expect many other ways in which your retirement life will be different from that of previous generations. Let's reviews some of the ways the scope of retirement is changing in the U.S., including financial and social changes.

1. Fewer Americans Expect Social Security as Major Source of Income

More and more American workers are expecting Social Security to play a smaller role in their income during retirement. In 2016, only 35% of U.S. workers expect Social Security to be a major source of income in retirement. There are two reasons behind this. First, 32% of workers aren't confident in the ability of the Social Security Administration (SSA) to continue providing benefits of at least equal value to the benefits provided to current retirees. Second, given this lower confidence in the SSA, 46% of workers expect employer-sponsored retirement saving plans to be a major source of income in 2016, up from 43% in 2010.

2. More Americans Are Postponing Their Retirement Age

Given that nearly seven in 10 Americans have less than $1,000 saved for retirement, it shouldn't be surprising that 77% of them are postponing retirement. For 26 years, the Retirement Confidence Survey from the Employee Benefit Research Institute (EBRI) has been tracking the American worker's confidence in their ability to afford a comfortable retirement. This survey is clearly showing an increasing retirement age trend over the long-term.

The good news is that upon reaching your full retirement age, ranging from 65 to 67 depending on your birth year, you get 100% of the benefits that you're entitled to. For every additional year past your full retirement age that you wait to retire, you can get up to an 8% increase in benefits through delayed retirement credits from the SSA. (See also: 6 Smart Ways to Boost Your Social Security Payout Before Retirement)

3. More Americans Are Expecting to Never Retire

Never retiring may seem like a strange notion, but consider that continuing to work part-time or full-time past age 70-1/2 can allow you to delay your required minimum distributions from certain retirement plans, including traditional 401Ks, Roth 401Ks, and IRAs. By rolling over your old retirement account to an eligible new employer-sponsored plan, you can continue to contribute to your new retirement plan and delay applicable income taxes. Not everybody can do this, such as those who are owners of 5% or more of the business sponsoring the retirement account.

Before trying this strategy, consult with your previous and new retirement plan administrators and your financial adviser to avoid any potential penalties and have a full picture of the process.

4. $2 Million Is the New $1 Million

More and more financial advisers are making the case to upgrade the old rule of thumb of $1 million for retirement to $2 million. Consider the following:

  • In 2016, the average student loan balance was $37,172, up from $33,000 two years earlier.
  • In the last four years, rents are rising quickly, with a 3.8% increase in 2016, alone.
  • According to NerdWallet, in 2015, the average U.S. household carrying debt had a $15,675 credit card balance, a $27,865 auto loan balance, and a $172,341 mortgage balance.

In 2012, 30% of adults age 65 and older had outstanding debt, up from 44% in 1998. Given that more Americans depend on debt to get by, many have to address the fact that some debts don't just go away even after they're gone. Combine that with ever-rising living costs and you can understand why some of us need to plan for a higher retirement saving goal. (See also: What Happens to Your Debt After You Die?)

5. Americans Are Living Longer

Another reason why more Americans are deciding to postpone their retirement age and looking into bigger nest eggs is that they are living longer. Back in 1980, the life expectancies for American men and women were 70.0 and 77.4, respectively. According to the latest data from the SSA, a man and a woman reaching age 65 today can expect to live, on average, until age 84.3 and age 86.6, respectively. However, about 25% of those 65-year old Americans will live past age 90 and 10% of them will live past age 95.

Knowing that you're very likely to live longer should be great motivator to set up your retirement plan and have your retirement strategy in place. Even if you're 15, 10, or even five years away from retirement, you can still take several steps to boost your nest egg. (See also: 7 Retirement Planning Steps Late Starters Must Make)

Today is the best day to get your retirement saving plan back on track.

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