Working until age 70 won't ensure a secure retirement for everybody

Working until age 70 or later won’t be enough to allow most people to retire comfortably, according to new research by the Employee Benefit Research Institute.

Many financial experts have said that people just need to work a little longer and between 80 and 90 percent of households will have an adequate amount of income to retire with, but EBRI’s research shows that for about one-third of the households between age 30 and 59 in 2007, that won’t be enough.

“It would be comforting from a public policy standpoint to assume that merely working to age 70 would be a panacea to the significant challenges of assuring retirement income adequacy, but this may be a particularly risky strategy, especially for the vulnerable group of low-income workers,” noted Jack VanDerhei, EBRI research director and author of the report.

Working longer does have some benefits.  Nearly two-thirds of households aged 50 to 59 in 2007 would be considered ready for retirement at age 70, compared to 52 percent of those same households if they were to retire at age 65.

A person’s participation in a workplace retirement plan plays a key role in a person being able to retire, the research found.

EBRI’s research is based on data from millions of actual 401(k) participants and its model incorporates longevity risk, investment risk and the risk of potentially catastrophic health care costs, such as nursing home care.

“While workers need to make their own decisions on the correct trade-offs of saving today vs. deferring retirement, they should be able to expect that those presenting alternatives be as accurate and complete as possible, avoiding simplistic ’rules of thumb’ that may result in future retirees, through no fault of their own, coming up short,” VanDerhei observed.

The Employee Benefit Research Institute is a private, nonpartisan, nonprofit research institute based in Washington, DC, that focuses on health, savings, retirement, and economic security issues.


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