Retirement Trends: Predictability, Retirement Age, and Longevity

Published September 12th, 2022
Reading Time: 4 minutes
retirement age

Written by:

Brandon Kraus, CFP®, AWMA®
Zoe Network Advisor

Retirement Trends: Predictability, Retirement Age, and Longevity

Published September 12th, 2022 
Reading Time: 4 minutes
retirement age

Written by:

Brandon Kraus, CFP®, AWMA®
Zoe Network Advisor

Here are three aspects of retirement that differentiate old retirement trends of previous generations from new retirement trends. These are income predictability, retirement age, and longevity.

Worrying is an evolutionary survival trait that is hardwired into our brains; most of us seek control and prefer order over chaos. There is no way around it; our instinct is to equate uncertainty with potential danger. Ironically enough, life is continuously changing, especially in the investment world. The Federal Reserve (the Fed) meets eight times a year to discuss changes to interest rates (if needed). As a result, markets are volatile, and thanks to multiple round-the-clock financial news networks, we are reminded of this fact daily. 

The economy swings between expansion and contraction. With all this uncertainty, various concerns arise: 

  • How do we worry less about retirement savings? 
  • What are the retirement trends that we should pay attention to? 
  • What steps can we take to empower retirement? 

Are you craving control yet? Here are three aspects of retirement that differentiate old retirement trends of previous generations from new retirement trends. These are income predictability, retirement age, and longevity.

Income Predictability

Let’s take a trip down memory lane. Previous generations of retirees counted on pensions to enable their retirement. In the United States, government employees started receiving pensions in the mid-1800s, and many corporations began offering pensions to their retiring employees by the early 1900s. When pensions weren’t the primary source of income for retirees, Social Security would replace their earnings. Between pensions and Social Security income, many retirees of previous generations had predictable retirement income streams that they could never outlive.

Access to a time machine would likely show us that future retirees will not have the same predictable income. First, there is a dramatic decline in corporate pensions. In 1979, 87% of employees at medium and large companies participated in pension plans. As of 2017, only 16% of Fortune 500 companies offered “defined benefit pension plans”. Second, responsibility for retirement income has shifted from the employer (who provided pension plans) to employees who are now responsible for funding and investing in their own 401(k) or 403(b) plans. Third, even Social Security cannot be counted on fully; The Old-Age and Survivors Insurance (OASI) Trust Fund is on track to be depleted by 2034, meaning retirees will receive only 77% of their benefits. In summary, the old retirement trend included income predictability, while the new retirement trend does not. Hence, our human instinct to worry may be triggered.

Retirement Age

Sixty-five used to be the magic number for retirement. To begin with, half of the state pension systems used 65 as the retirement age. Additionally, the federal Railroad Retirement System and most corporate pensions followed suit. 

Today there is no definitive retirement age to target. Anyone born after 1938 must wait anywhere from a few months to a few years after turning 65 before becoming eligible for full Social Security benefits. Why? Few pensions are left, meaning most retirees have no guaranteed retirement income stream at age 65. While the old retirement trend was to work until age 65, the new trend leaves those not yet retired feeling uncertain about when they should retire. 

Longevity

70 is the new 60. We are living longer and healthier lives than our grandparents. With age comes wisdom, and with wisdom come possibilities. This reality leads to several questions: Do I want to work longer or part-time? Will I outlive my money? How can I optimize my retirement experience?

A Plan to Empower Retirement

These three retirement trends all create even more uncertainty. Coupled with the unpredictability of markets, Fed rates, and the economy, how can you worry less and have a happy retirement?

As if uncertainty wasn’t enough, there is also pressure. Unfortunately, there are no do-overs in retirement, and you only get one chance to get it right. That is why financial planning is so critical for reducing uncertainty and living your retirement to its fullest. 

Here are a few benefits of financial planning for retirement:

  •   Defining what is important to you (your objectives, needs, wants, & wishes).
  •   Setting goals.
  •   Evaluating your current financial situation.
  •   Developing a retirement savings strategy.
  •   Determining the best investments to meet your needs.
  •   Anticipating inflation and economic volatility.
  •   Monitoring your progress and making adjustments along the way.

Working With a Professional

Here is another modern trend: we live in a DIY (do-it-yourself) age where many people consult websites for education. While gathering information from reliable sources may help you acquire knowledge and expand your financial literacy, if you want to live a happy retirement, working with a wealth advisor is best. 

Today there is a real danger of employees making planning and investment mistakes that can derail their retirement dreams. Financial planning and investing are multifaceted and complex, with many factors to consider, such as taxes, insurance, benefits, and tens of thousands of investment options. By working with a professional Wealth Advisor, you can reduce the uncertainty of retirement and enjoy the happy retirement you have always dreamed of.

Disclosure: This blog is not investment advice and should not be relied on for such advice or as a substitute for consultation with professional accounting, tax, legal or financial advisors. The observations of industry trends should not be read as recommendations for stocks or sectors.

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