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Seniors Face Pressure to Work Longer to Afford Retirement Spending

Seniors Face Pressure to Work Longer to Afford Retirement Spending

By    |   Tuesday, 05 April 2016 06:00 AM

Americans are living longer, and that’s going to mean many people will find new ways to spend their golden years, including getting a job.

“If you retire at 63 and live to 85, you will have been retired for a quarter of your life. Should you live to 95 instead, you will have been retired for a third of your life. On average, that cannot work financially,” writes Alex Pollock, a senior fellow at the R Street Institute in Washington, in a RealClearMarkets blog.

Retirement income will be squeezed as traditional sources of funds, including pensions and Social Security, cut their payouts or risk insolvency. A Citigroup study estimates $18 trillion has been promised to people but won’t be there when they’re ready to leave the work force, according to Pollock.

“There are only two answers: Put more money in the piggy bank while you are working -- and as retirements grow longer, this means a lot more,” he says “Or make the retired years fewer by working longer. Or both.”

People need to work three years for every year they plan to spend in retirement, he says, based on a scenario of saving 10 percent of income a year and getting a 4 percent yield.
“That means if you start working at 22 and live to 86, the financeable retirement age is 70,” he says. “Or if you start work at 25, it is 71. Or starting at 18, then 69.”

People who haven’t saved enough will have to ponder extending their careers or finding another job.

“The Federal Reserve is now making the problem much worse for retirement savings by engineering low or zero or negative real interest rates,” Pollock says. “We have to hope this expropriation of savers by the Fed is temporary, historically speaking.”

Soaring Rent

The pressure to keep working will intensify for seniors who face soaring rents and shortages of places to live, according to The Wall Street Journal.

More and more retirement-age Americans are renters, according to research from Harvard University’s Joint Center for Housing Studies. People age 65 and older rented more than 6.1 million households in 2014 as a primary residence, up 29 percent from 2001, the data show.

People age 75 and older are mostly like to have “severe” cost burdens, meaning more than half of their incomes go to rent.

The typical renter ages 65 to 69 has a household income of $24,700 a year, or 40 percent less than the median renter household income for those ages 45 to 49, the WSJ reported, citing an analysis of census data for 2014.

Rising rents are particularly noticeable in areas with strong job growth, like San Mateo County south of San Francisco.

There, more than 54,000 new jobs were added to the work force since 2010, but only 2,100 new housing units were built. In some sought-after buildings, monthly rent for a two-bedroom apartment jumped 52 percent to $2,800, according to the WSJ.

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Americans are living longer, and that's going to mean many people will find new ways to spend their golden years, including getting a job.
retirement, work, job, labor
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2016-00-05
Tuesday, 05 April 2016 06:00 AM
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