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You think you can get out by age 65.
But, can you?
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CNBC’s in-house financial-planning guru Suze Orman says that age 70 should be the new standard retirement age retirees should expect.
You likely disagree. You might find age 65 (or younger) more appealing. Many people do.
But what you want and what you can get are two different matters.
Orman has the financial data to back her age-70 assertion.
For one, the liability side of the balance sheet is a mess for more people nearing retirement.
I refer specifically to debt.
Forty-two percent of households headed by someone 65 to 74 years old reported they carry a credit card balance measured in thousands of dollars. That’s a 10% increase over the past two decades.
Believe it or not, student loan debt plagues many older Americans. The Wall Street Journal reports that $86 billion in student loan debt is owed by those 60 years or older.
In total, the median debt level among the elderly has doubled over the past decade.
The more you owe, the more likely you are to file for bankruptcy.
Can you imagine a worse nightmare than filing bankruptcy in your 60s? It all but guarantees an extended work career.
Unfortunately, that’s the new reality these days. One in seven filers is someone at or near retirement age. That’s a fivefold increase over the past 25 years.
Debt itself paints an incomplete financial picture. We also need to consider the asset side of the balance sheet.
The trend in bankruptcy filings among those on the back-nine of life points to insufficient retirement income.
Debt is on the rise. Income fails to keep pace.
Government statistics show that the average monthly Social Security check is $1,404. For many people that’s it for the month. More than 40% of single adults say that at least 90% of their income is composed of that check alone.
I mentioned student debt. I did so for a reason. It can eat into your retirement income, even if you shirk paying.
The number of Social Security recipients 65 and older who have had their checks garnished to pay student loans has increased 500% over the past 15 years, according to the Government Accountability Office.
Yes, many of us have other retirement income sources, a 401(k) for most. But were you diligent in funding the account? Many people weren’t.
A 2019 Vanguard study found that the median 401(k) account size for those age 65 and older is only $58,035. If the amount were invested to generate a 10% income yield (a generously optimistic assumption), you would still have less than $500 a month in additional retirement income.
Reduce unnecessary debt, by all means. More important, raise your income potential, whether you’re retired or working.
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