For many Americans, the road to retirement keeps getting longer.
Even if boomers and Gen Xers delay their retirement past the age of 65, many
of them still would not have sufficient income to cover their basic expenses and
health costs, according to new research from the Employee
Benefit Research Institute (EBRI).
In fact, even if a worker delays his or her retirement age into their 80s,
there is still a chance the household will be “at risk” of running short of
money in retirement. The chance of success, however, does improve
as individuals reach their late 70s and early 80s.
One major factor that makes a difference is the whether individuals are
participating in a 401(k) or other defined contribution retirement plan after
the age of 65.
“Our research finds that many people may have to delay retirement far beyond
age 65 to increase the probability that they have enough money to cover their
retirement expenses at a comfortable level,” said Jack VanDerhei, EBRI’s
research director and co-author of the report.
“What really makes a positive difference, we found, is if people who
continue to work after 65 also continue to contribute to a defined contribution
retirement plan," he said.
Since income before retirement is crucial to a boomers' ability to afford a
comfortable retirement, EBRI research delved into how working past age 65
affects different pre-retirement income groups.
Among the lowest income group, only 29.6 percent of these households would
have plenty of resources to avoid running short of money in retirement 50
percent of the time. But this increases to 34.6 percent if retirement is put off
until age 67, and 46.5 percent if retirement is deferred until age 69.
In the second pre-retirement income group, less than a quarter of households
would have a 70 percent probability of adequate income if they retired at age
65. This jumps to 36.5 percent if they are on the job to age 69.
For those households in the next-to-highest income group, almost half
would have a 70 percent chance of sufficient funds if they retired at age 65.
This increases to 60.5 percent if they keep working to age 69.
In the highest pre-retirement income group, three-quarters are likely to have
ample income if they retired at age 65. This increases to 81.1 percent if they
are employed to age 69.