Those retiring now and in the future are facing a very different landscape than their parents pinched on both the income and the outgo ends, the Senate Aging Committee has been told.
Witnesses said that the need for retirement income is growing, since lifespans continue to extend–the average time in retirement has grown from 13 years in 1960 to about 20 years today—and health care costs rise—even with health insurance, costs for premiums and out of pocket expenses such as deductibles now on average equal about a fifth of retirees’ incomes. And those who will require long term care, for which few have insurance, will face potentially high costs there.
On the income end, they cited factors including the erosion of defined benefit retirement plans, the increase in the Social Security full benefits age and the low interest rates in the kind of stable investments favored by retirees—meaning that retirees need a larger nest egg than in the past to generate the same level of income.
However, one said, the typical working household approaching retirement has just $111,000 in IRA and other retirement savings, which would yield a monthly income of only about $400.