With the pace of change constantly on the rise, retirement accounts in America face and changing and uncertain future. In an article written for the MarketWatch website, Alicia Munnell writes about the shifts in retirement and how we can adapt to our changing needs. Two major contributing factors to this impending crisis are the gradual rise of Americans’ life expectancy and recent alarming spikes in healthcare costs, which are showing signs of further increase. These higher costs will demand greater contributions from our retirement income, an increase that Social Security alone simply cannot cover – especially as its replacement rates continue to decrease and the Full Retirement Age rises. On top of it all, Social Security is facing a long-term deficit which could result in further cuts in order to reach equilibrium.
Within private employment sector, Munnell notes a shift a shift from traditional pensions to 401(k) plans. These plans generally prove to be insufficient for many Americans, as the average total today is only $120,000 for retirement. Yet these could be considered the lucky ones, as half of the private sector does not even have access to an employer-sponsored retirement plan.
If these realities continue, Munnell makes the sobering case that more than half of today’s working households may be unable to maintain their standard of living in retirement. Of course, one way for Americans to alleviate part of the problem is to work longer and retire later. And with the rise in life expectancy, we are healthier and able to work for a longer period. In fact, delaying Social Security benefits from 62 to 70 would increase monthly payments by a drastic 76%.
Tags: 401(k), Alicia Munnell, full retirement age, MarketWatch, medicare, retirement, social security
