Working longer may not be enough

Jun 30, 2011

Poor financial planning could have people working much longer

Middle-aged Americans and their younger counterparts who think that if they simply work a few extra years their retirement future will be secure, may be in for a rude awakening. A study released by the Employee Benefit Research Institute has found that Baby Boomers and Gen Xers will not have enough savings to cover their basic expenses once they stop working, even if it is at age 70 or 80.

"What really makes a positive difference, we found, is if people who continue to work after 65 also continue to contribute to a defined-contribution retirement plan," said Jack VanDerhei, EBRI's research director and co-author of the report.

People that may have invested in a whole life insurance policy or an annuity, which would provide a secure amount of income after retirement, will be better off than those who will be completely dependent on Social Security.

Workers in the lowest income group had a three in 10 chance of not running out of money if they retired at 65, but if they postponed retirement until they were 69, their chances doubled. In the third-highest income group, half of the workers have a 70 percent chance of financially sustaining their retirement at 65, and one in three can do so at 69, the study found. 

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