A recent article in The Economist outlines the three options retirees have to thwart the rapidly approaching retirement crisis: retirees must live on less, they must work longer, or save more while they are working. Or a combination of the three.
A variety of factors have contributed to the bubbling problem for retirees. For one, people are living longer, so the average length of retirement period is greater than ever. The average age of retirement is also lower than it was decades ago. And Social Security, which was once intended as the main source of income for retirees, is scheduled to run out in 2033, as those who retired younger have ended up receiving far more than what they had paid in over their lives.
So what can be done? Retirees need to plan ahead. They should ensure that they will be bringing in 70% of their pre-retirement income through a combination of Social Security and retirement savings, although most households 65+ are not meeting that threshold.
Retirees who don't meet that threshold should either plan to cut living costs and live on less, or postpone retirement. Waiting until 70 years of age to collect Social Security results in a 76% increase in payment amounts, compared to the minimum retirement age of 62.
And we all need to save more while working. Social Security currently replaces an average of 41% of a retiree's past earnings and is not intended to be a sole source of income.
Retirement planning can be a tricky and overwhelming process. But proactive planning will help you achieve the delicate balance necessary to ensure you are financially secure for the duration and able to enjoy your retirement years.
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