2010 December 05 Sunday
Study Finds Retirement Dates Must Shift Older

People need save a larger fraction of their incomes and work longer to be able to retire with sufficient funds.

Nyhart (www.nyhart.com), one of the nation's largest independent actuarial and employee benefits consulting firms, released their "Fall 2010 401(k) Retirement Readiness Study" today as part of the firm's ongoing look at the effectiveness of the traditional 401(k) retirement benefit.

The 6-month study reviewed nearly 10,000 retirement accounts from employees at 110 public and private companies.  The study evaluated how contributions to their 401(k), the primary retirement tool for most of these employees, would affect the age at which they could retire.

Key results in Fall 2010 401(k) Retirement Readiness Study include:

  • 81% of employees 18 or older will not be able to afford to retire by the age of 65
  • Employees above the age of 55 will need to contribute more than 45% of pay through the remainder of their career to retire by age 65.
  • The average participant, relying on their 401(k) as a primary retirement vehicle, will not be able to retire until the age of 73.
  • Most employees age 60-64 will likely need to work until the age of 75 to be able to afford to retire at their current levels of contribution to their 401(k).
  • 7 in 10 employees age 24-and-under are not expected to retire by age 65.

Future generations of retirees won't have the defined benefit retirement plans that so many current retirees have. People are not stepping up to the savings rates that they need to maintain to be able to retire before they hit their 70s. Savings rates are so low that either many future elderly will live in poverty or they will work in their 70s. We can already see a trend toward higher labor market participation rates for those over 55 years old. That trend will continue out of necessity.

The recession made things worse, especially for those nearing retirement age.

The study is also the first to reveal the impact the economic recession of 2008-2010 has had on consumers age 55 and older who may have expected to retire at age 65. Craig Harrell, a senior retirement advisor and researcher in the study said “Most employees were under-contributing before the recession. With this further dip in retirement balances, if you’re ages 60-64, you have very little time to make up the losses recently incurred. Most employees in this age category will need to contribute as much as 45% of income or plan to work until you’re in your mid-seventies to retire at the level you expected.

Reality is even worse than these number suggest because Peak Oil is near. We just hit a 2 year high in oil prices even though economic activity in the US is still below the pre-recession peak (check out this graph comparing the current downturn with previous downturns by unemployment changes). The high oil prices are delaying economic recovery. This is a sign of what is coming. Peak Oil will cause a long bear market, lower living standards, lower earnings, and higher rates of unemployment. Plus, lower incomes will mean less tax revenue. Therefore governments will cut retirement benefits including medical benefits. So you'll have to pay more out-of-pocket. My advice: up your savings rate and pay off any debts at a faster rate.

Share |      By Randall Parker at 2010 December 05 09:36 PM  Economics Retirement

Jeff Maylor said at December 5, 2010 10:54 PM:

So, correct me if I'm wrong, but working longer hours and more years for less retirement, equals a lower standard of living. Welcome to the new America. You'll be able to limp from your job as a Walmart Greeter at the age of 80 to a nursing home for a couple of years "retirement" before you die.

mrm said at December 6, 2010 9:52 AM:

I know the French will disagree but we live longer than we used to so it is only natural that we should work longer than we used to on average. Having spoken with plenty of financial advisors for my parents and my family, the idea of sufficient funds is very flexible. Anyone who plans on carrying a mortgage into retirement will be a few steps back, but if a person hits age 65 with no mortgage, sufficient retirement income has a much lower threshhold. The biggest uses of retirement income, besides discretionary spending, are mortgage payments (if still around) and then medical bills. A huge chunk of medical bills can be managed with good planning years before (vitamins, diet, activity), just the same as financial planning. Type 2 Diabetes, high blood pressure and cholesterol patients, I'm looking at you. We will probably revert back to a majority (or close) of households having a surviving elderly parent living amongst them. McMansions might serve a purpose after all.

Jeff Maylor said at December 6, 2010 2:31 PM:

The problem with working later in life is that most people aren't in great shape past a certain age, even if they do live longer. When I look around at most 70 years olds, they are not in good shape. Sure there are exceptions, but most have significant deterioration at that age. And that is especially true if there are physical demands to their jobs. I hate to see Great GrandPa trying stock shelves. And if we say they should be exempted from physically demanding jobs, then we'll have to have all kinds of new federal laws to regulate their employment. I just see problems unless we actually find a way for people to be more youthful in their old age.

Winston Smith said at December 6, 2010 4:05 PM:

Jeff Maylor is absolutely right. A large percentage of old people cannot do even light work such as standing for an hour. Their health problems may not let them even sit at a computer for 8 hours a day, or they may not have the cognitive abilities left to do much of any work. Furthermore, just because old people need work does not mean that an employer will hire them. The geriatric are not in high demand as they have no competitive advantage. If there was full employment they might be able to work, but with the unemployment rates as they are and will be in the near future, the old will be the last hired. The French are not the unrealistic ones hear; the "geezers must never retire" ones are. They're going to be on the dole one way or another; we must plan for that reality.

Randall Parker said at December 6, 2010 7:35 PM:

Jeff Maylor,

I agree that some 70 year olds can no longer work. This is why the failure of adults to save for retirement is going to make for lots more impoverished old people.

Currently in the United States Social Security, Medicare, accumulated savings, and assorted pension plans from jobs make the elderly more affluent than children on average. Poverty rates for older people are pretty low compared to the rest of the population. But poverty rates for the old will rise because defined benefit retirement plans are being phased out.

Winston Smith,

Since we taxpayers can not afford for everyone to retire at age 65 (or much sooner for many government employees) we have got to make retirement up thru about 72 based on health needs. If people are too sick to work they get to retire. If they've saved enough they get to retire. But taxpayers can't fund the retirement for the vast majority in their 60s.

Mthson said at December 6, 2010 7:43 PM:

People don't need exorbitant cutting edge 21st century medical care if they chose to destroy their health and not plan for their financial needs.

Parasites have been draining civilization since the beginning.

Winston Smith said at December 6, 2010 8:32 PM:

Randall, there is no work for them anyway. There aren't enough jobs for the young. Old people will only be employed if employers can't find anyone else. This won't be the case for the foreseeable future. Think about all the 60 somethings you know who have jobs. I'll bet there are a small number of experts in their fields who could get another job easily; however, most only still have their job because of inertia. If they lose their current job, they're done.

Deal with this reality. The budget can be balanced by taxing the rich, equalizing government salaries / benefits with the private sector, eliminating wasteful government programs like much of the military, drug war, higher education, and killing off parasitic portions of the economy such as wall street, insurance companies, real estate, etc.

The fact is that most people, even those employed at good salaries, don't do work of positive value anymore. The world doesn't need everyone toiling in the field all day long to function like it once did. We're more productive now; that means working less. That living standards are falling in a period of rising technological development is nothing more than a crime perpetrated by the elites on the citizens of the world. It should not go unanswered.

Jeff Maylor said at December 6, 2010 9:01 PM:


That issue about the defined benefit plans being phased out is yet another problem. I honestly don't know how we avoid a pretty substantial drop in our standard of living over the next 20 years. Unless there is a real stock market boom that raises the wealth of the elderly (and I'm not counting on that), we will all have to pay more taxes and live with fewer benefits at some point. The economy is likely to be flat for years, probably over a decade or more due to our high debt and the after effects of the financial crisis. The demographic changes of higher diversity will lead to an even lower trust society and impose more transaction costs. And the illegal immigrants we have imported appear to be from the left side of the IQ bell curve - not good for economic growth.

Of course, technology may continue to improve and making some things cheaper, so maybe that will offset some of the pain. I guess the take home message for those who have at least a few years until 65 ---- SAVE. And find a way to protect what you save. Yes, I'm Debbie Downer today.

miles said at December 6, 2010 11:43 PM:

Senior Suicides. Euthanasia. Living with children. Living off Social Security in a RV. Those will be the options for plenty of oldsters in about 30 years unless we have some great technological advance that generates a good deal of wealth for us.

California Kid said at December 7, 2010 5:52 PM:

I think the net effect may be that Baby Boom seniors will have to sell their 2000+ sq. ft. homes to immigrants, to get enough cash to pay other immigrants to care for them. Also, the 60-year old seniors may become the care-givers for the 80-year olds. No one else may want to do it. Maybe the Boomers will learn some feelings of kinship for each other.

WJ said at December 7, 2010 6:49 PM:

"we have got to make retirement up thru about 72 based on health needs. If people are too sick to work they get to retire."

Oy. Talk about wide-scale fraud just waiting to happen. What 66-year-old can't plausibly fake joint pain? That's not to mention the effective reward people will get for not taking care of themselves. Once again, the people who have leaned on government aid their entire lives, the very people who don't take care of their bodies, will be advantaged over and subsidized by the responsible.

"That living standards are falling in a period of rising technological development is nothing more than a crime perpetrated by the elites on the citizens of the world"

Living standards aren't falling everywhere, they're falling for us. They're falling for us because China and India have recently pulled hundreds of millions of people off the farm, out of poverty, and into offices and factories where they make less than us, but far more than ever they did. Yes, the elites are playing us off against each other, and reaping much of the profit. But a great many people are still benefitting from that. If you want to live in a place without such parasitic elites, go to Africa. On a map of the 2000 largest public companies Africa practically disappears, except for three countries with oil and one living off the diminishing proceeds of white rule.

Engineer Dad said at December 7, 2010 8:54 PM:

WJ said: If you want to live in a place without such parasitic elites, go to Africa.

Such a silly, faddish, form of misdirection, as if Africa's tin pot money grubbing elites don't milk their pseudo-electorate to their early graves or that economies of scale are inherently evil.

Winston Smith said at December 8, 2010 4:14 AM:

"If you want to live in a place without such parasitic elites, go to Africa."


Yes, it's the fine people at Goldman who seperate us from the savanges. It's in spite; not because of them that we live better than Africans.


Randall Parker said at December 8, 2010 6:29 PM:


We'll need to use brain scans and other scanning and testing tech to detect people with real disabilities.

Move to Africa? What net advantage does that offer?

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