Business & Investment

The best way to improve the post-retirement safety of older workers

Ready for today’s retirement investment pop quiz?

What is the most important thing you can do to increase your chances of not running out of money when you retire?

I’ll try to answer this question right away, but first, note that this question isn’t just a hypothesis, it’s likely to be true personally. A newly published survey of retirees suggests that the vast majority of retirees are in dire financial hardship. for example, Survey from smart real estate:

  • 62% of retirees do not have enough savings to retire (as judged by standard financial planning formulas).

  • Thirty percent of retirees report no savings and 75% report debt.

  • Average retired person Spending His annual income is $ 4,000.

Obviously, corrective action is urgently needed.

It’s easy to identify what Do not Make a big difference: more savings and investments. It’s not that these things aren’t important. But the differences they make are long-term. If you’re already approaching retirement, it’s hard to see how increasing your annual contribution to your 401 (k) moves the needle after you retire.

Want to be a better investor? Sign up for the How To Invest series

This insight is Study a few years ago at the Boston University Retirement Research Center.. This study focused on statistics produced by the Center to measure the proportion of adults at work age who are at risk of not being able to maintain their current standard of living at retirement. They call this the National Retirement Risk Index (NRRI).

Consider what the authors of the study found when simulating the impact of all working adults increasing their retirement savings contribution by 5 percentage points. This is a significant increase, more than double the current rate. And yet, according to researchers, this significant increase had only a “relatively mild effect on NRRI.”

The biggest impact of this simulated change was for workers under the age of 40. In contrast, for workers between the ages of 50 and 59, NRRI decreased by only 3 percentage points when savings and contributions more than doubled.

Of course, for those who are about to retire, being told that they should have saved and invested more in their youth is of little help. It only makes you feel sick about yourself. You want to know that you can make a real difference.

read: I love small towns and railroad tracks. The budget for the house is $ 200,000. Where should I retire?

Work long

Answer to this question provided by a Boston University study: Postpone retirement. Researchers report that postponing retirement for just two years will reduce NRRIs by a third.

This has a big impact for several interrelated reasons. Needless to say, you will not withdraw funds from your retirement account during the additional years you have been working longer. In addition, your social security benefits will increase by 8% each year, which will be postponed until the age of 70.

Of course, these are compelling reasons.But as I wrote beforeThere are also compelling uneconomical reasons for working longer: early retirement is associated with increased mortality.

It’s important to realize that not everyone has access to these findings. Many people retire earlier than they would otherwise, for example because of poor health. But if possible, working longer may be the most important single thing that can be done to enhance financial security after retirement.

This finding can be humble for commentators (including myself) who want to focus on which retirement investment strategy has the longest-running record. However, it is primarily young investors who enjoy the benefits of better long-term investment strategies. For those who are approaching retirement, the simple decision to work longer can have a far greater impact.

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat rate to be audited.He can reach at

The best way to improve the post-retirement safety of older workers The best way to improve the post-retirement safety of older workers

Back to top button