Why Most People Will Not Be Able to Retire at Age 62

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Although many people spend 20, 30 or more years saving for retirement, the sad truth is that today, many people will not be able to retire – even when they reach age 62, the earliest you can start receiving social security benefits. Despite some degree of financial planning, many individuals simply have been unable to reach their retirement income goals and are forced to work well beyond the standard retirement age. In fact by 2030, it will not be uncommon for people to be working into their 70′s.

In some cases, insufficient retirement savings is not necessarily a case of not putting enough aside, but more so a result of the market fluctuations over the past few years that have left many without the nest egg that they had worked so hard to build. Of the many factors affecting why most people cannot retire at age 62, the top reasons include:

  • They cannot afford to do so. It is estimated that most retirees will need between 60 and 70 percent of their pre-retirement income in order to retire comfortably. But, due to market conditions, as well as health and longevity factors making your time in retirement longer, many people simply do not have enough stashed away to carry them through if they retire at 62.
  • They have had the value of their home decline which has reduced their net worth. Many retirees in the past have had the advantage of living in a debt free home during their retirement years. And, those who have a great deal of equity in their homes have also been able in the past to take advantage of a reverse mortgage – thus, helping to boost their retirement income. Today, however, with the sharp decline in real estate values, millions of retirees will not only be unable to use this option, but most will still have a house payment as well.
  • They have had to use some amount of their retirement savings for emergencies or other purposes. Due to job loss or other factors, more and more people have had to dip into the savings that was earmarked for retirement to get them though a current situation. Not only do they lose the benefit of compounding on these funds, they most likely have to pay back-taxes on these hardship withdrawals.
  • They do not recognize the impact of inflation. Inflation can be considered the “silent killer.” Even those who have saved for retirement may not have factored in the rising cost of living – as well as the continued rising cost of living that they will incur throughout their retirement years. Stamps are no longer just 27 cents – so people need to be sure that they will have enough retirement savings to not only get them through today’s expenses, but tomorrow’s expenses as well.
  • They will pay too much in taxes. Here is where it is extremely important to have an actual retirement plan. Saving for retirement means not only having enough in your portfolio, but also protecting as much of that as you can from taxes. We’ve all heard the phrase, “It’s not what you make, it’s what you keep that counts.” One wrong decision and you could end up losing close to half of your retirement savings to Uncle Sam.
  • Many people simply procrastinate. Even though most people understand the importance of saving for retirement, they don’t always understand the ramifications of waiting to start doing so. But, using the power of compounding, the earlier you begin can help you to really get a head start. And over time, the funds can grow substantially, even if you are earning lower than average returns.

Rather than look at the above list in despair use it as a call to action and realize that like the average American, you will not be able to retire in your 60′s. But while working to 70 may be the new reality, you better start saving for retirement now, or you could literally become a working stiff. Even with the ability to only make small contributions, every little bit counts. Your savings of any amount could mean the difference between working indefinitely or enjoying some aspects of a retirement lifestyle.

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{ 6 comments… read them below or add one }

goodgirl.goodgirl February 10, 2013 at 11:34 am

do not hang your at where you cannot reach, have no debt before you retire have money in the bank

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goodgirl February 10, 2013 at 11:33 am

live within your needs

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gail April 16, 2011 at 10:35 am

This won’t apply to many state and local government workers who can retire and collect a pension after a few decades of service, regardless of how old they are. Some public sector employees who started working in their 20s and never changed employers are eligible to collect pension benefits for life beginning in their 50s. Now that’s the life. The govt wants to cut all our benefits, how about their own?

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Edwin @ Save The Bills April 9, 2011 at 5:05 am

Due to so many people losing their homes to foreclosure, they’ll need to start over on a new home and thus will be paying a mortgage well into their 70′s and 80′s.

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Emily April 4, 2011 at 5:05 pm

Hi Andy,

I wanted to touch base with some news from ING Individual Retirement this morning. A recent study titled “Hearts and Minds of Retirement Consumers” sheds new light on the psychological roadblocks that prevent consumers from making better use of their existing retirement investment opportunities and the educational resources currently available to them…even though retirement is their most important financial goal (according to 98 percent of the 2,600+ survey respondents). This survey (see below for details) also reveals that close to two-thirds of the respondents (65 percent) don’t know how to reach their retirement goals.

Americans seek control, yet remain dependent on guidance when planning for retirement
WINDSOR, Conn., April 4, 2011 –

A majority of Americans find retirement planning confusing and overwhelming and are looking for additional help, according to a white paper and study by the ING Retirement Research Institute. Based on a quantitative and qualitative study of more than 2,600 Americans(1) conducted by the Boston Consulting Group, ING found that while Americans highly value their workplace retirement savings plans, they are also looking for even more guidance and resources from their employers to help them further their retirement goals.

According to the findings, less than half of the respondents (48%) indicated that they feel “in control” of their retirement plan investments. The study, entitled “Shedding Light on Retirement,” found that while consumers want control and empowerment of their money, the expectation is that their employers, advisers and financial providers will help guide them. Importantly, workers also want regular contact from their employers about retirement advice and services. The study found that 89% of respondents want help allocating their investments, and 86% want guidance calculating their financial needs in retirement, with nearly as many (84%) saying that they want solutions for calculating and creating retirement income.

“Most Americans are busy with their jobs, their families and their personal pursuits, and say that they don’t have the time or interest to become experts in retirement planning,” said Lynne Ford, CEO of ING Individual Retirement. “The results from our study were clear: Americans want a roadmap to help them navigate to and through retirement.”

The study also highlighted that consumers seek this direction in a set of tools and services that enable them to develop clear and actionable short- and long-term goals. More than three-quarters of Americans (80%) said they found it important to seek specific tools and services to provide advice on how to calculate financial needs for retirement. Other areas where Americans found specific tools and services to be important included providing advice on how to allocate retirement savings (79%) and providing an annual “financial checkup” to set and measure progress (78%).

“As a whole, consumers highly value choice, yet too much can be overwhelming,” said Ford. “Consumers also value the control to make their own retirement-planning decisions but want detailed instructions on how to accomplish their financial objectives.”

To help Americans with clear information about retirement, the company has introduced a new website, RetireWithING.com. The site aims to help people make informed decisions about retirement while making it easy for them to consult with an ING retirement professional if they desire personal guidance about what to do with their retirement savings or income planning.
A key attribute of the website is clear language. “We intentionally shied away from using financial jargon,” Ford said. “The emphasis is on learning and motivating people to talk to someone so that they will take action.”

Visitors have three primary choices when navigating from the homepage: They can answer three basic questions to get advice targeted to their retirement needs, choose from a second menu of choices such as “Learn the Basics;” “Ready to Invest;” or “Talk to Someone;” or they can consider help from life-stage options such as “Starting a New Job;” “Between Jobs;” “Family Changes;” or “Considering a Rollover.” Each page of content focuses on a particular learning point and offers visuals and interactive components to help teach each idea.

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Ravi Gupta April 4, 2011 at 4:20 pm

I think you’ve written a great article. I’m a very frugal person and I believe in buying things that you only need. I would add onto the list they buy things that aren’t needed or atleast that’s how I feel. I could be 100% wrong but being able to retire also means being able to make sound, responsible decisions.

-Ravi Gupta

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