We are becoming more aware that a lot of Americans are not financially prepared to fund their own retirement, especially with the recent headlines. The difference between being able to afford retirement and not, can be surprisingly thin if you know the right levers to push.
A recent article in SmartMoney magazine illustrates the point that working longer could help tip the odds in your favor. But who wants to work until they’re 90? No need to panic. The article notes that the average retirement age in America is 64 for men and 62 for women. If you were to extend that average worklife by just four years, you actually pull three levers at once. You generate four years of additional income (and savings), which boosts the value of your retirement portfolio. At the same time, you take away four years of consuming your retirement portfolio, meaning that it will have to work less hard to support you in your retirement years. And finally, you raise the age at which you would take full Social Security benefits. For each $1,000 you could have received at age 62, you would receive $1,760 at age 70–and that amount is indexed to inflation, which means it retains its full purchasing power.
And if more Americans were to work additional years, they would add more to the Social Security system and release some of the its financial strains.
There are two other reasons to consider adding those four years to your work-life. First, people today are living longer, and have the ability to contribute their skills to the global economy much longer than previous generations. When Social Security was originated, the average worker lived only a year or two after collecting benefits at age 65. Today, the life expectancy in the U.S. is 78.7 years, giving the average 65-year-old retiree enough freedom to live without working for approximately 13 years!
The second reason to work longer is to avoid something serious, but seldom talked about: mental atrophy after leaving the workplace. In his excellent analysis of traditional retirement–entitled “The New Retirementality”–author Mitch Anthony demolishes the notion that your golden years are best spent on the golf course. The human mind is like human muscles; it must be exercised vigorously in order to maintain its full functionality.
You may not need to pull all these levers at once—but take comfort knowing that there are relatively simple ways to change your retirement outlook–and possibly improve peoples’ lives (and the Social Security system) at the same time.