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Will You Need to Work Until 70?

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I continually stress that people need to save for retirement.

The sooner you start the better. And the easier it is grow wealth through compound returns [4]. But regardless if you are 20, 30, 40, or 50, you need to begin saving now and prudently invest for your later years.

If not, you may just find yourself greeting customers as they enter your local Walmart. 

You Will Have Plenty of Competition for a Walmart Job

An incentive to start seriously investing comes courtesy of the Employee Benefit Research Institute [5] (EBRI).

For about one-third of working-age households (those between ages 30 and 59 in 2007), working until age 70 won’t enough to provide adequate income in retirement.

EBRI’s Retirement Security Projection Model indicates that nearly 64% households aged 50‒59 in 2007 would be “ready” for retirement at age 70, compared with 52% those households if they were to retire at age 65.

So 36% of U.S. households will work until age 70 and still not have enough money saved to retire properly. And that percent falls to about 50% if you wish to retire at age 65. Scary stuff.

Do Not Count On Government

Most governments are in heavy debt [6]. Will they have enough money to pay current levels of social security benefits to retirees? I have my doubts. I fully expect benefit payout to seniors to decrease in the future. We are seeing this already. [7]

In fact, many governments have already gone, or may go, bankrupt. This means that if you are counting on a pension from government employment (police, fire, etc.), it may not be what you expect. Look at California [8] and its ever increasing number of bankrupt municipalities. When these situations are restructured, will the various pension agreements (that are a huge part of the fiscal crises) survive intact?

Also, governments need to raise additional revenues to pay interest on debt and general cost overruns. Expect taxes to continue to rise, which will further erode your savings.

Consider Spain [9]. Value Added Tax of 21% (so almost every purchase you make, you pay 21% to the government), cuts in benefits, indirect taxes on energy, etc. All these impact your life if your are a Spaniard. And someday Greece [10] and Italy [11] may actually implement real austerity measures.

Okay, but that is Spain (and maybe Italy and Greece). Yes, but look at where you live. There are very few places not in financial distress. It is simply a matter of degrees. The fact that no one is seriously addressing their financial problems suggests more Spains are on the way.

Do not count on the status quo when planning for your future retirement needs.

Save Early, Save Often

I understand that finding available cash to start saving may be a real challenge. But sacrificing a little today may be a lot easier than competing with all those other seniors for a spot greeting people at Walmart.

Improve your cash flow, maximize contributions to tax deferred accounts, and start seriously saving for retirement today. If you do, you may lessen the odds of asking me if I “want to supersize that” down the road.