The U.S. population is approaching a landmark sometimes called Peak 65, the point next year when more than 12,000 people will start turning 65 each day, hitting an estimated total of 4 million for the year, according to U.S. Census Bureau figures. By the end of 2030, all Baby Boomers – those born between 1946 and 1964 – will be older than 65.
Consider working with a financial advisor to create or update your retirement plan.
Worries About Retirement Finances
This explosion of Americans at or near retirement age comes at a time when traditional assumptions about retirement are undergoing fresh scrutiny. Fewer workers can rely on lifetime pensions and will have to manage retirement with their own savings and Social Security benefits. A recent survey by the Employee Benefit Research Institute found just 64% of respondents felt good about their retirement prospects.
And while Social Security is designed to provide only about 40% of retirement income, the National Institute on Retirement Security found that Social Security benefits are the sole income for more than 40% of retirees and that almost 40 million households have no retirement savings at all.
“The old metaphor of the three-legged stool of retirement planning — employer pensions, personal savings and Social Security — no longer holds,” according to Jason Fichtner, author of a recent whitepaper for the Alliance for Lifetime Income. “As a result of these changes in our nation’s retirement system, many Americans lack sufficient, reliable and protected retirement income that will last for the rest of their lives.”
How to Prepare for Retirement
While Fichtner’s report doesn’t offer specific approaches to creating a secure retirement, financial advisors offer a number of suggestions, the following four of which are widely advocated.
Wait to claim Social Security: Americans lose as much as $3.4 trillion in potential protected lifetime income from Social Security benefits by claiming before they reach full retirement age, resulting in a median lifetime income loss of nearly $200,000, according to an analysis of the Federal Reserve’s 2019 Survey of Consumer Finances.
Claiming your benefits as soon as you’re eligible to collect at age 62 can result in benefit payments that can be as much as 30% less than what you’d get by waiting until your full retirement age, which falls between 66 and 67. You also can increase your benefit payments by 8% each year you wait after your full retirement age to file, up until age 70.
Consider working in retirement: As of 2020, 10.6 million Americans age 65 and older were in the workforce, according to the Bureau of Labor Statistics. This can allow you to delay claiming Social Security, continue contributing to retirement accounts (with a possible employer match) and keep you busy rather than spending money. However, working can mean you’ll pay some income tax on your Social Security benefits, and you need to assess whether your health, family commitments, working conditions and other factors eliminate that option.
Build your retirement assets: Going through your budget to free up cash to contribute to an individual retirement account, a 401(k) or similar workplace plan or even a health savings account will give you additional resources in retirement and the opportunity to invest for long-term growth.
Find an expert: Meeting with a financial planner means you’re much more likely to save into a retirement account and increase your savings and investing. An advisor also can review strategies for claiming Social Security, minimizing taxes on your retirement money and helping you create an appropriate investment strategy.
Too many Americans are facing retirement without being adequately prepared to support themselves for up to 30 years after leaving the workforce.
Waiting as long as possible to claim Social Security, considering full- or part-time employment, making contributions to a retirement plan a priority and getting professional advice can make a lasting difference in the size of your retirement nest egg.
Tips on Retirement
- If you don’t have a financial advisor yet, finding one doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have free introductory calls with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Check out our no-cost retirement calculator for a quick estimate of how much you need to save to be ready for your retirement.
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10,000 Americans retiring daily