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Personal Finance

Americans are retiring later and expecting to work longer than in past decades

Select looks at the possible reasons behind this new trend of working longer and retiring later.

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Between inflation being at record-high levels and the recent stock market volatility, more seniors approaching retirement age are considering the option to retire later in life.

According to a new Gallup survey, which interviewed 1,018 adults in the U.S., the average reported retirement age has increased from age 57 — where it was in 1991 — to age 61 in 2022. The survey also showed that individuals' planned retirement ages increased as well, from age 60 in 1995 to 66 in 2022, revealing a trend in which people are retiring later and expecting to work longer.

Select spoke with Jeffrey M. Jones, Ph. D., a Gallup senior editor, about the reasons why people might be retiring later or planning to do so.

Retirees can wait longer to collect Social Security

Jones attributes this trend of higher retirement ages and expected retirement ages to three factors: An increased full retirement age for Social Security, a longer average life expectancy and higher living costs and medical expenses. 

He believes seniors may be retiring later, or at least expecting to retire later than they did in the 1990s, because of changes that were made to the full retirement age needed to receive Social Security benefits.

While retirees are able to collect Social Security benefits starting at age 62, they will receive a reduced monthly benefit — in order to get 100% of your monthly check, they'd have to start collecting benefits at full retirement age, which is between the ages of 66 and 67 for those born after 1943.

In 1983, the Reagan administration raised the full retirement age for Social Security benefits from age 65 to 67 due to funding issues, a change that would be phased in over the span of the next 22 years. 

Retirees who delay the collection of their benefits beyond their full retirement age can end up receiving an increased benefit. For every year you put off collecting after full retirement age — up to the age of 70, that is — you'll receive 8% more in benefits. That means retirees have a chance to earn 132% of their benefits by waiting just a few more years, depending on their full retirement age.

Despite the advantages of delaying benefits or waiting until full retirement age, the majority of seniors end up collecting their benefits early. According to the Congressional Research Service, in 2021, 29% of new beneficiaries claimed retirement benefits at age 62.

People are living longer than they used to

The second factor that may affect retirement ages and planned retirement ages are changes regarding the average life expectancy.

According to the Social Security Administration, when Congress increased the full retirement age from 65 to 67 in 1983, it did so, in part, because of longer average life expectancies. In other words, most people currently approaching retirement age should plan for this time of their life to encompass nearly 20 years — in 2019, the average expected life expectancy for a 65 year old man was age 83.3, while for women, it was 85.7. 

"I think people realize that they are living longer. If people retire around full retirement age, it might be a 20-year retirement," says Jones. "Maybe 20 or 30 years ago, they lived 5 or 10 years [after full retirement age]."

Retirement costs are higher than they were in the past

The last factor that may impact expected retirement age is the higher cost of living and medical expenses. 

The year-over-year inflation rate — as measured by the Consumer Price Index in June 2022 — was 9.1%, the highest it has been in more than 40 years. As a result, consumers are now paying more for everything from rent and groceries to gas.

Medical expenses are rising as well. Fidelity Investments found that, in 2022, a couple at age 65 can expect to spend a whopping $315,000 on healthcare expenses in retirement, reflecting a 5% uptick compared to the previous year's rates. Increased living and health costs could also be influencing how long seniors choose to stay in the workforce.

As these everyday costs increase, it's becoming more important to save for retirement on your own. Your first priority should be contributing enough to your 401(k) to ensure you receive your employer's matching 401(k) contribution, if it offers one. 

A traditional individual retirement account (IRA) or a Roth IRA can be a good choice for those who either don't have a 401(k) or those who just want to set more aside for retirement.

Both are tax advantaged retirement accounts, though they have a few differences: A traditional IRA doesn't have any income requirements and the money you place in it won't be taxed until you take distributions in retirement. A Roth IRA, in contrast, is only available to single-filers making less than $144,000 a year or married couples filing jointly who are making less than $204,000 annually. However, any contributions you make are with income that's already been taxed, and when you make withdrawals you'll not pay any taxes on your gains.

Select ranked Charles Schwab, Fidelity Investments and Betterment as the companies offering the best IRAs.

Charles Schwab

  • Minimum deposit and balance

    Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No account minimum for active investing through Schwab One® Brokerage Account. Automated investing through Schwab Intelligent Portfolios® requires a $5,000 minimum deposit

  • Fees

    Fees may vary depending on the investment vehicle selected. Schwab One® Brokerage Account has no account fees, $0 commission fees for stock and ETF trades, $0 transaction fees for over 4,000 mutual funds and a $0.65 fee per options contract

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    None

  • Investment vehicles

    Robo-advisor: Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium™ IRA: Charles Schwab Traditional, Roth, Rollover, Inherited and Custodial IRAs; plus, a Personal Choice Retirement Account® (PCRA) Brokerage and trading: Schwab One® Brokerage Account, Brokerage Account + Specialized Platforms and Support for Trading, Schwab Global Account™ and Schwab Organization Account

  • Investment options

    Stocks, bonds, mutual funds, CDs and ETFs

  • Educational resources

    Extensive retirement planning tools

Terms apply.

Fidelity Investments

  • Minimum deposit and balance

    Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No minimum to open a Fidelity Go account, but minimum $10 balance for robo-advisor to start investing. Minimum $25,000 balance for Fidelity Personalized Planning & Advice

  • Fees

    Fees may vary depending on the investment vehicle selected. Zero commission fees for stock, ETF, options trades and some mutual funds; zero transaction fees for over 3,400 mutual funds; $0.65 per options contract. Fidelity Go is free for balances under $10,000 (after, $3 per month for balances between $10,000 and $49,999; 0.35% for balances over $50,000). Fidelity Personalized Planning & Advice has a 0.50% advisory fee

  • Bonus

    Find special offers here

  • Investment vehicles

    Robo-advisor: Fidelity Go® and Fidelity® Personalized Planning & Advice IRA: Fidelity Investments Traditional, Roth and Rollover IRAs Brokerage and trading: Fidelity Investments Trading Other: Fidelity Investments 529 College Savings; Fidelity HSA®

  • Investment options

    Stocks, bonds, ETFs, mutual funds, CDs, options and fractional shares

  • Educational resources

    Extensive tools and industry-leading, in-depth research from 20-plus independent providers

Terms apply.

Betterment

On Betterment's secure site
  • Minimum deposit and balance

    Minimum deposit and balance requirements may vary depending on the investment vehicle selected. For Betterment Digital Investing, $0 minimum balance; Premium Investing requires a $100,000 minimum balance

  • Fees

    Fees may vary depending on the investment vehicle selected. For Betterment Digital Investing, 0.25% of your fund balance as an annual account fee; Premium Investing has a 0.40% annual fee

  • Bonus

    Up to one year of free management service with a qualifying deposit within 45 days of signup. Valid only for new individual investment accounts with Betterment LLC

  • Investment vehicles

  • Investment options

    Stocks, bonds, ETFs and cash

  • Educational resources

    Betterment RetireGuide™ helps users plan for retirement

Terms apply.

Bottom line

It turns out many Americans are expecting to retire later than they did three decades ago and are doing so at older ages. This trend could be attributed to factors such as an increased full retirement age, higher average life expectancies and more expensive living costs, especially during times of record-high inflation.


Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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