The New Norm: Retirement Age Climbs In The U.S.

A Note From Patricia:

Hello and welcome to Forbes Advisor’s Weekly Brief, where each week we dive into the realities of consumer finance and empower you with knowledge to help make your financial journey easier. 

Retirement is a coveted reward for a lifetime of hard work—but for many Americans, it’s getting farther and farther out of reach.

Since moving away from pensions nearly four decades ago, the responsibility of saving for retirement has fallen largely on consumers through Social Security contributions and 401(k)s. Social Security’s pay-as-you go model is intended to provide a steady income stream after retirement, but largely falls flat. 

The estimated average Social Security monthly retirement benefit in 2024 is about $1,907—a far cry from the $5,070 monthly average spending of households run by someone 65 and older, according to the U.S. Bureau of Labor Statistics. If you plan on retiring sooner rather than later, you’ll want to have more than just Social Security to rely on.

As the gap between expenditure and retirement benefits widens, Americans are forced to remain in the workforce longer. The average retirement age for men is 65, up from 62 in 1995. For women, it has jumped from 60 to 62 over the same time span. 

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This week, we’ll discuss why Americans are retiring later in life, as well as some helpful tips on catching up on your retirement savings. Are your savings on track for retirement? Tell us in the comments below.

Sincerely,

Patricia Louis

Editor, Forbes Advisor

Why Are Americans Retiring Later In Life?

Most people assume Social Security benefits will be enough to maintain their current lifestyle, but they typically only cover about 40% of your lost earnings, according to the Social Security Administration. To bridge the gap, most Americans stash away additional cash in retirement plans, such as 401(k)s and IRAs. 

But data shows that saving the remaining cash you’ll need to retire—at least 15% of your pre-tax salary for retirement if you want to retire comfortably by age 62 (assuming you started saving at age 25)—is very difficult. As a result, 50% of women and 47% of men ages 55 to 66 have no personal retirement savings, according to the U.S. Census. 

According to the Economic Policy Institute (EPI), nearly half (43%) of older workers aren’t participating in workplace retirement savings plans, either because their employer doesn’t offer one or because they don’t meet the requirements based on hours worked or tenure. The EPI notes that these people may end up working for more years to make ends meet.

This is why having a substantial nest egg is vital. To get ahead of the curve and start catching up on your retirement savings, here are a few things you can do:

Take advantage of employer matching contributions: Enroll in employer-sponsored retirement savings accounts, such as a 401(k). According to Vanguard’s How America Saves study, 95% of companies that provide employer-sponsored retirement accounts contributed to employee accounts. This is a great way to boost your retirement savings quickly. 

Open and contribute to an IRA: If your employer doesn’t offer a retirement plan—or you want to boost your retirement fund—opening an Individual Retirement Account (IRA) could be the answer. With an IRA you can contribute money on your own for your future, and depending on the type of IRA and whether you have access to an employer-sponsored plan, you may also be able to receive tax benefits. 

Consult with a financial advisor: If you’re concerned you’re not on track for retirement or don’t know where to start when it comes to saving, consult a financial advisor. These professionals can help you understand how long your money will last and what changes you must make to ensure your golden years are secure and successful.

To learn more about the average age of retirement, as well as how to start saving on your own, read more here.

Related Stories: 

• How To Save For Retirement
• Top 10 Retirement Tips For 2024
• How To Invest For Retirement   

Here’s what else is going on in the news this week:

• Borrowers Who Attended Now-Closed College Get $6.1 Billion In Student Loan Forgiveness The Biden Administration is canceling another $6.1 billion in student loan debt—this time for 317,000 people who attended a chain of for-profit colleges accused of misleading students about the career opportunities their educations would bring.
• May Fed Meeting: Stagflation Fears Persist As Fed Holds Rates Steady In a widely anticipated move, the Federal Open Market Committee has opted to maintain its fed funds interest rate at its current target range between 5.25% and 5.5%.