Nearly 40 percent of Americans 50 and older now expect they will have to work during retirement out of necessity, to maintain their lifestyles. Part of the problem is many older people face higher-than-expected living expenses. Another significant factor is inadequate savings during their working careers.
According to a recent survey conducted by Scudder Kemper Investments Inc. and the AARP Investment Program from Scudder, 60 percent of Americans between the ages of 50 and 54 do not have -- or expect to have -- enough money to maintain their desired standard of living in retirement. More than a third of those in their early 60s expect a retirement where their dreams exceed their means.
As a result, nearly 40 percent of the respondents say they face or expect to face the previously unanticipated reality of having to work during their retirement years.
Baby Boomers Approach Retirement
The baby boom generation is edging toward retirement, and the challenge of paying for that retirement is on the minds of many people, including the nation's public leaders. Federal Reserve Board Chairman Alan Greenspan has publicly urged Congress to move quickly to fix the Social Security system before it goes broke -- an event anticipated in 2031.
Numerous proposals have been made to salvage Social Security: raising the retirement age, lowering benefits, raising payroll taxes, or converting to a partial or fully privatized system where workers could invest some or all of their Social Security payroll taxes in stocks, bonds or mutual funds.
Whatever measures are ultimately taken to keep the system solvent, one thing remains clear -- future retirees will not be able to depend solely on Social Security to maintain their current standard of living.
For the average taxpayer, Social Security only replaces roughly 35 percent of pre- retirement income. Yet according to a study by the U.S. Department of Health and Human Services, 49 percent of retirees rely on it as their main source of income. For those who have company-paid pensions -- and many don't -- the combination of Social Security and pensions will still pay for only 50-to-60 percent of their pre-retirement income. That means future retirees must increasingly rely on their own investments and savings to pay for retirement -- easier said than done.
The recent Scudder survey of Americans 50 and older found that higher-than-expected living expenses now were interfering with their ability to save for the future. Sixteen percent of the respondents said they are currently providing care for an elderly parent; another 19 percent expect to have to do so in the future.
Thirteen percent said they are paying more than anticipated for their child's college education; another 13 percent expect higher-than-planned for college costs in the future.
