Regardless of how old you are now, you’ll probably have a harder time pulling off a financially secure retirement than your parents did.
A great many of us haven’t planned and saved well. Besides that, fundamental changes in American life make it harder for today’s generations to achieve a comfortable life after work.
Here are eight reasons why the last decades of life are harder now — and eight things you can do to bolster your own retirement.
1. We’re living longer
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The number of Americans 90 and older tripled — to 1.9 million — in the three decades leading up to 2010, according to the U.S. Census Bureau. That population is expected to quadruple by 2050 — accounting for about 10 percent of the total.
In 1935, the average 65-year-old could expect to live 12 more years. Today, the Social Security Administration says, the average man at 65 can expect to live an additional 19.3 years and the average woman 21.6 more years.
Living for more than 21 years without working takes a lot more money than getting by for 12 years. If members of your family have lived long lives, plan for the chance that your retirement savings will need to stretch 30 years or more.
Tip: Find a trusted adviser. A fee-only Certified Financial Planner (preferably recommended by someone you know) can help you plan for retirement and make the most of your resources in ways you might not have anticipated. Take time to find someone really superb.
2. Seniors can’t shake the recession
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The Great Recession robbed earning power from workers, hitting men and women in their 50s and early 60s especially hard.
Even in 2016, 61 percent of American workers have yet to fully recover from the Great Recession of 2007-2009 — including 13 percent who still haven’t begun to recover and 7 percent more who may never recover, says a report from the Transamerica Center for Retirement Studies. Home values and investment savings also plummeted.
Seniors have had less time to make up those losses.
Tip: Don’t wait, take action. If you are still recovering from the last economic downturn, don’t let pride prevent you from getting help. Don’t spend retirement savings or home equity trying to repay unmanageable debt.
You can seek help by talking with a credit counselor through the nonprofit National Foundation for Credit Counseling, or a bankruptcy attorney through the National Association of Consumer Bankruptcy Attorneys.
3. Private pensions are nearly extinct
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Only a few decades ago, many large employers offered “defined-benefit” pensions, guaranteeing retirees and their spouses a fixed monthly payment for life.
Times have changed. The Bureau of Labor Statistics says that in 2011, just 1 in 10 large employers offered fixed benefit plans, covering 18 percent of private industry employees, after declining steadily for three decades. (By contrast, many government positions at all levels still offer pensions, according to BLS data.)
A report by global advisory company Towers Watson says that, by late 2013, only 24 percent of Fortune 500 companies offered new employees any type of defined-benefit plan (most were “hybrid” plans, not traditional fixed-payment retirement plans) compared with 60 percent in 1998.
Most of us, if we’re lucky, instead have tax-deferred 401(k) retirement savings plans that we need to keep track of ourselves, instead of being managed by experts.
Tip: Save more. Without a pension, you simply need to save more for retirement. Follow the basic rules for retirement savings, including minimizing taxes, working longer, investing regularly and keeping on top of your investments. Invest the savings in indexed funds, which typically outperform actively managed mutual funds or investing the money yourself.
Boost savings by every possible penny. Keep increasing 401(k) contributions to meet your retirement goal. Don’t have a goal? Use several retirement calculators to decide how much you’ll need and what to save to get there. Here are two calculators:
4. Social Security is still under pressure
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Unless Congress acts, Social Security Trust Fund reserves are expected to run out in 2034, according to the Social Security Administration. Assuming lawmakers address that issue, however, the amount you receive depends in part on when you start claiming it.
Tip: Be strategic about claiming Social Security. Most people claim their Social Security benefits at age 62, which is as soon as they can. But with that approach, you’re likely to lose money you’ll need when you’re older.
Want to get a larger monthly check? Read: “14 Ways to Get Bigger Checks From Social Security.”
5. Interest rates are low
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Retirees in previous generations earned higher interest on savings and low-risk investments. But, because interest rates are at historic lows, many of today’s retirees must take on riskier investments to generate income.
Tip: Don’t dip into retirement savings. Lower interest rates mean your savings may disappear more quickly as you spend. But no matter how tight things get, shun the temptation to borrow from your retirement savings. Don’t do it for any reason, not even to pay off debt.
6. Seniors have more debt
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Earlier generations tried to enter retirement with a paid-off home and no debts. That’s harder to do today.
Tip: Get help. Debt won’t go away on its own. For help in getting out of debt, read “7 Steps to Get Ruthless About Paying Off Your Debt.”
7. People have to work longer
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Workers on average tell Gallup that they expect to retire at 66 and nearly a third plan to work beyond age 67. But poor health, a job loss or the need to care for loved ones can force people to retire before then. The average age at which Americans actually do retire is 60, Gallup says.
Tip: Let the kids fend for themselves. Unemployment and low wages have made it hard for many young adults to launch their independent lives. A poll of parents with 18- to 29-year-old children showed that 44 percent were providing their offspring with either “frequent support when needed” or “regular support for living expenses” — which was among the findings of a 2013 study on “emerging adults” published by Clark University.
But funding a child’s lifestyle is another reason you may have to work longer — or worse, it may doom your own retirement.
So, put retirement savings ahead of paying for your children’s college. The kids have more time than you do to make up financial losses.
8. More seniors are single
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There are some 12 million adults age 65 and older who live alone — more women than men — according to Pew Research Center.
Many find freedom in being single, but it costs more for one person to support a household than two sharing overhead.
“Among elderly Social Security beneficiaries, 21 percent of married couples and about 43 percent of unmarried persons rely on Social Security for 90 percent or more of their income,” the Social Security Administration reports.
But the fact is, Social Security was designed as a safety net, not a promise of a comfortable life. That’s why saving on your own is essential, all the more so if you are single.
Tip: Don’t touch home equity. If your retirement is looking shaky, don’t even consider using home equity for non-essentials like remodeling. Treat it like an emergency fund.
What are you doing to rescue your retirement? Tell us in the comments below or on our Facebook page.