Americans are retiring later than they did in the 1990s

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With record-high inflation and recent stock market volatility, more seniors approaching retirement age are considering the option of retiring later.

The median reported retirement age has risen from 57 — where it was in 1991 — to 61 in 2022, according to a new Gallup poll that surveyed 1,018 adults in the United States. Well, from age 60 in 1995 to age 66 , year of life in 2022, showing a trend that people are retiring later and expecting to work longer hours.

Select spoke to Jeffrey M. Jones, Ph.D., a senior editor at Gallup, about the reasons people are retiring later or planning to.

Retirees may wait longer to collect Social Security

Jones attributes this trend toward higher retirement ages and expected retirement ages to three factors: an increased full Social Security retirement age, longer average life expectancies, and higher living and medical expenses.

He believes seniors may retire later, or at least expect to retire later than they did in the 1990s, because of changes made to the full retirement age required to receive Social Security benefits.

While retirees can start receiving Social Security benefits from age 62, they receive a reduced monthly benefit — to receive 100% of your monthly check, they would have to start receiving benefits at full retirement age, which is between 66 and 67 for those after Born in 1943.

In 1983, the Reagan administration raised the full retirement age for Social Security benefits from 65 to 67 because of funding problems, a change that would be phased in over the next 22 years.

Retirees who delay drawing their pensions beyond full retirement age may end up receiving an increased pension. For every year that you defer collecting after full retirement age – that is, until you turn 70 – you receive an 8% increase in benefits. That means retirees have the chance to earn 132% of their benefits by waiting just a few more years, depending on their full retirement age.

Despite the advantages of deferring benefits or waiting until full retirement age, most seniors start drawing their benefits earlier. According to the Congressional Research Service, 29% of new beneficiaries in 2021 will start claiming pension benefits by age 62.

People are living longer than they used to

The second factor that can affect retirement ages and projected retirement ages is changes in average life expectancy.

When Congress raised the full retirement age from 65 to 67 in 1983, it was partly because of longer average life expectancies, according to the Social Security Administration. In other words, most people currently approaching retirement age should plan for almost 20 years for that stage of life – in 2019 the average expected life expectancy for a 65-year-old man was 83.3 years, while for women it was 85.7 years.

“I think people are realizing that they are living longer. If people retire around full retirement age, it could be a 20-year retirement,” Jones says. “20 or 30 years ago they lived maybe 5 or 10 years [after full retirement age].”

Pension costs are higher than in the past

The last factor that can affect the expected retirement age is the higher cost of living and medical expenses.

The annual inflation rate – as measured by the consumer price index in June 2022 – was 9.1%, the highest level in more than 40 years. As a result, consumers are now paying more for everything from rent to groceries to gas.

Medical costs are also increasing. Fidelity Investments found that a couple aged 65 can expect to spend a whopping $315,000 on health care expenses in retirement in 2022, a 5% increase from last year’s rates. Increased living and healthcare costs could also have an impact on how long seniors choose to stay in the workforce.

As these everyday expenses increase, it becomes more important to save for retirement yourself. Your first priority should be to contribute enough to your 401(k) to ensure that you receive the appropriate 401(k) from your employer, if they offer one.

A traditional Individual Retirement Account (IRA) or Roth IRA can be a good choice for those who either don’t have a 401(k) or just want to set aside more for retirement.

Both are tax-advantaged retirement accounts, although they have a few differences: A traditional IRA has no income requirements, and the money you put into it isn’t taxed until you receive distributions in retirement. In contrast, a Roth IRA is only available to single applicants making less than $144,000 per year or to married couples applying together and making less than $204,000 per year. However, any contributions you make are already taxed income and when you make withdrawals you pay no tax on your winnings.

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bottom line

It turns out that many Americans expect to retire later than they did three decades ago, and are doing so at an older age. This trend could be attributed to factors such as higher full retirement ages, longer average life expectancy and higher cost of living, especially during periods of record high inflation.

Editorial note: Any opinion, analysis, review, or recommendation expressed in this article is solely that of Select’s editors and has not been reviewed, approved, or otherwise endorsed by any third party.

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