Publisher's Perspective

In any good-sized group of those who are still working, if you ask people when they will retire, a number likely will respond "a couple of years after I had hoped" and a few will say "probably never."


That’s in part due to the continuing effects of the economic slowdown that destroyed vast amounts of wealth—both in investments and in home values—that people had been counting on, as recently as only five years ago, to underpin their retirement security.

Another reason likely will be a realization, brought on by the need to closely examine their situations in light of the downturn, that their basic assumptions were off in the first place. People have realized that they had over-estimated what their retirement income would be, or they under-estimated what their retirement expenses would be, or both.

This has resulted in a long series of reports showing that large numbers of people, even those in the immediate run-up to retirement years, are not financially prepared to retire. As one example of this, a measure called the National Retirement Risk Index shows that 51 percent of today’s working households are at risk of not being able to maintain their current living standards in retirement, even given a retirement age of 65.

One common piece of advice to such findings is that people should simply work longer. But that is a daunting prospect for many, and seems open-ended.

A look at the math, though, can be at least somewhat reassuring.

Said the report: "About a quarter of households have to work just one to three years beyond 65, and a portion of this increase would be offset by rising longevity over the ext two decades. Only 9 percent have to work an additional seven or more years. These results paint a different picture than recent opinion surveys, which find that people anticipate that they will have to work much longer

By working to age 70, 86 percent of those households would be able to maintain their current living standards.

In large part, that’s due to the impact of delaying receipt of Social Security benefits, which are enhanced every year that someone delays receiving them between age 62, the earliest eligibility for most, and age 70. There is no further enhancement after age 70.

For federal employees under the FERS system, the Social Security factor applies. In the FERS civil service benefit portion, each year of working increases the benefit by 1 percent of high-3 salary—which in most cases itself will increase. In addition, under FERS the multiplier for all years of service increases from 1 percent to 1.1 percent for those who have at least 20 years of service and work at least until age 62. That alone is a major incentive to keep working at least until that point.

Under CSRS, each year of continued work adds 2 percent of high-3 to the annuity. And under both systems, additional time to invest through the TSP or elsewhere will continue to boost that part of their retirement security.

The report said that overall, while today’s workers likely "will need to work longer than their parents, they are also healthier and better educated, generally have less physically demanding jobs, and can expect to live longer. In short, working longer is feasible for most households, and it does not mean working forever."