Casting Doubt on the Working Longer Retirement Plan

Millions of boomers have resigned themselves to working longer – age 70 or later – so that they can eventually afford to retire from the work force. Is this wishful thinking? Recent research from the Employee Benefit Research Institute suggests that it may be. I don’t bring this up to make folks feel more depressed than they already are. Rather, it is better to face reality now than to be surprised then crushed by it later.

So what does the EBRI report tell us? Here are some “highlights”:

The report compares “50% probability of retirement success rates” at different retirement ages among different pre-retirement income levels. Starting with workers in the highest income quartile, 90% of those in that quartile will have a 50% retirement success rate at age 65. Workers in the second highest income quartile will need to wait until age 72 before 90 percent of them will have a 50 percent probability of retirement success.  Age 72?

But this is where the news get much worse.  Those in the second-lowest income quartile will need to wait until age 81 before 90 percent of that quartile will have a 50 percent probability of success.

And the bottom quartile?  Those folks would need to work until age 84 before 90 percent of their households would have even a 50 percent probability of success!

Who can work full-time to age 81 or 84? Not many of us, that’s for sure and not enough to make it part of a retirement plan.

There is a lot more data in the report and plenty of analysis, if you are into that sort of thing.  To me, the real takeaway is not just how poorly prepared for retirement so many of us are (we already knew that). No, the surprising news is that for so many of the unprepared, working to age 70 still won’t get you ready to retire.

It may be time for a new retirement plan, based on a combination of lowered income expectations and a lifestyle based on extreme frugality. More on that later.

Here is the full EBRI report for your reading pleasure.

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