Current:Home > InvestMany Americans want to stop working at 60 and live to 100. Can they afford it?-Angel Dreamer Wealth Society D1 Reviews & Insights
Many Americans want to stop working at 60 and live to 100. Can they afford it?
View Date:2024-12-23 15:19:44
A significant swath of Americans now expect to spend almost 40 years in retirement, with about 1 in 8 workers planning to stop working before they turn 61. At the same time, most workers say they want to live until they're 100.
That means some workers are eyeballing a four-decade retirement, an ambitious goal that comes with serious downsides. Among them: How to fund almost 40 years of retirement at a time when most workers are far from reaching their savings goals.
The findings, from a recent survey from financial services firm Corebridge Financial, underscore the gap between Americans' lofty dreams for their golden years versus their financial realities. The median retirement savings balance for people who are between 55 to 64 — just years from potentially stepping back from work — is $185,000, according to NerdWallet.
"100 is a very long and fulfilling life, and that's pretty optimistic and great to see," Bryan Pinsky, president of individual retirement at Corebridge Financial, told CBS MoneyWatch. "That optimism and hope does come with a little bit of tension — only 27% are very or extremely confident that they won't outlive their retirement savings."
In fact, the survey, which polled about 2,300 adults, found that only about 4 in 10 respondents believe their savings will last 20 years in retirement, suggesting that while more Americans want a three- or four-decade retirement, few expect they'll have funds that will stretch that long.
The rule of thumb for retirement savings is to draw down 4% of one's retirement assets each year. That means someone with $185,000 saved in a 401(k) will have annual income of $7,400 from their savings — hardly a big cushion, especially if one needs extra medical care or assisted living in old age.
Even more troubling are the 3 in 10 Americans over 59 years old who don't have a penny saved for retirement. Those workers are likely to spend decades in old age surviving solely on Social Security, a plan that's geared to replace only a portion of one's working income. The typical retiree on Social Security receives $22,800 annually from the program — above the poverty line, but hardly enough to fund a cushy retirement.
Only about 10% of Americans between the ages of 62 and 70 are both retired and financially stable, Teresa Ghilarducci, a professor at The New School for Social Research in New York and a retirement expert, recently told CBS MoneyWatch. Increasingly, her research has found, many seniors need to return to work to earn extra money despite being "retired."
The realities of longevity risk
Longevity risk is a cornerstone of retirement planning that few Americans understand, Stanford University expert Annamaria Lusardi told CBS MoneyWatch last year. This issue involves understanding how long you're likely to live once you hit retirement age, with many Americans underestimating this figure — and therefore failing to sock away enough money to support themselves.
On the other hand, workers who believe they'll live until 100 might be motivated to stash away more money for their retirement years.
Interestingly, Gen Z, the youngest generation in the workforce, is also the most optimistic about reaching their centennial anniversaries, with about 63% saying they want to reach the milestone. That's about 10 percentage points higher than baby boomers or Gen X.
That could explain why Gen Z is taking retirement more seriously than older generations did at their age. About 3 in 10 Gen Zers (who are between 11 to 26 years old) currently have a 401(k) or IRA, compared with 1 in 10 Gen Xers when they were the same age in 1989, according to a recent study from the Investment Company Institute.
How to fund a 40-year retirement
Asked how to fund a retirement that can stretch almost 40 years, Pinsky noted that it's important for workers to start saving. And he encouraged workers to visit a financial planner or expert who can help them devise a retirement plan.
"What is most important is recognizing whatever your retirement plan is, you need to revisit it on a regular basis," he added.
That's good advice for people who have access to employer-sponsored retirement plans, but experts like Ghilarducci point out that the U.S. retirement system is failing millions of Americans. For one, many workers lack access to 401(k)s and other employer-sponsored matches, especially people who are gig workers, low-wage employees or unpaid caretakers for family members.
Saving early is key, given the power of compound interest, but many young workers are strapped by student loans and the high cost of living and thus may not feel able to set away funds.
To be sure, millions of workers retire every year, even if they don't have the $1.8 million that Americans say they need to retire comfortably. But retirement is increasingly something enjoyed by the rich, with Ghilarducci's research finding that low-income workers typically spend about 12 years in retirement, while the rich spend about 20 years in retirement.
Aimee PicchiAimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.
TwitterveryGood! (8922)
Related
- Why Jersey Shore's Jenni JWoww Farley May Not Marry Her Fiancé Zack Clayton
- She had a panic attack during preterm labor. Then a nurse stepped in
- A Plant Proposed in Youngstown, Ohio, Would Have Turned Tons of Tires Into Synthetic Gas. Local Officials Said Not So Fast
- Tamales, 12 grapes, king cake: See how different cultures ring in the new year with food
- He failed as a service dog. But that didn't stop him from joining the police force
- New tech devices for the holidays? Here's how to secure your privacy
- Biden administration asks Supreme Court to allow border agents to cut razor wire installed by Texas
- Acclaimed Mexican actor Ana Ofelia Murguía, voice of Mama Coco, dead at 90
- Flurry of contract deals come as railroads, unions see Trump’s election looming over talks
- Japanese transport officials and police begin on-site probe after fatal crash on Tokyo runway
Ranking
- Brands Our Editors Are Thankful For in 2024
- Toyota, Mercedes-Benz, Ford among 1.2 million vehicles recalled: Check car recalls here
- Iowa's Tory Taylor breaks NCAA single-season record for punting yards
- A congressman and a senator’s son have jumped into the Senate race to succeed Mitt Romney in Utah
- Cruel Intentions' Brooke Lena Johnson Teases the Biggest Differences Between the Show and the 1999 Film
- Elections head in Nevada’s lone swing county resigns, underscoring election turnover in key state
- RHOSLC's Season Finale Reveals a Secret So Shocking Your Jaw Will Drop
- South Korean police raid house of suspect who stabbed opposition leader Lee in the neck
Recommendation
-
What is prize money for NBA Cup in-season tournament? Players get boost in 2024
-
Dan Campbell has finally been Lionized but seems focused on one thing: Moving on
-
How common are earthquakes on the East Coast? Small explosions reported after NYC quake
-
Air Canada had the worst on-time performance among large airlines in North America, report says
-
Richard Allen found guilty in the murders of two teens in Delphi, Indiana. What now?
-
1,400-pound great white shark makes New Year's appearance off Florida coast after 34,000-mile journey
-
Missed the 2024 Times Square ball drop and New Year's Eve celebration? Watch the highlights here
-
Rams' Kyren Williams heads list of 2023's biggest fantasy football risers