Increasing Retirement Age: We Can Avoid It!

Photo: Washington Memorial, taken by my Step-Father in the summer of 2015.

Recently, I was reading an article on  It talked about the increasing age of retirement in America.  The article was titled, "Millennials, Get Ready To Work Longer Than Your Parents"  In the article, it mentioned that a recent study showed that the retirement age has increased from an average age of 61.8 to 62.8.  This may not seem like a lot, but the article also states the following:

“It gets worse: Matthew Rutledge (co-author of the study) adds that while future retirees might, on average, choose to hang it up at about age 63, many if not most would be smart to keep working even longer. “It’s going to 63. But ideally, it might move to 66,” he says, noting that the combination of increased savings and extra Social Security benefits accrued in those extra few years make the typical worker much more financially secure.”
— Ian Salisbury

This article caught my eye, because of the title.  I was interested to see what proof they had that stated that the retirement age was increasing.  The author wrote this article based on a study compiled at Boston College University.  I believe that this study is relatively correct.  The retirement age is increasing.  Does this mean that we have to work longer?  Not necessarily, but it does depends on your choices.

I believe that one reason the retirement age is increasing, is because too many people rely on social security and pensions to fund their retirement.  If you do this, then you don't control your own financial future.  You leave that control to an inept government that can't even balance its own budget.  You won't make enough with social security or pension plans monthly to live on in retirement.  Therefore, we as a culture need to understand that the best way to financial independence is to take control of our retirement and save.

Lifestyle is another major reason that the retirement age is increasing.  In today's America, we focus too much on needs instead of wants.  Technological gadgets like 70 inch TVs, the latest iPhone, the newest gaming system and the newest tablets are considered needs..  There is no possible way that these things should ever be considered needs.  People line up outside stores for hours upon hours to waste their money on these things.  

In this world of instant gratification, we think of the here and now.  To be successful financially, you have to start thinking about things in the long term.  Did I got out and buy the Apple watch?  No, I didn't, instead I saved the money that would have been spent on the watch.  Do I have the latest iPhone?  Nope, I have an iPhone 5s, which I purchased after the iPhone 6 came out.  I was able to get the iPhone 5s for 50% off, because the iPhone 6 was in demand.  I then saved the difference.  Do I have the latest gaming device and latest games?  No, I still have an Xbox 360.  I will not waste my money on another gaming system, because I don't use them enough and the money could go to something better.

Everything that I mentioned above will slow down your ability to gain wealth and reach financial independence.  The easiest way to commit financial suicide is to continually stay in debt and always needing to have all the new things. Therefore, you need to change your mind set and start thinking about the future first.  

Now, I need to address somethings that was mentioned in the article about needing to work until 66, because the added savings will be able to set you up financially.  That is a complete lie.  If you would save and invest early in life, then you won't have to worry about needing to work 3 extra years in you 60s just to retire.  You should be able to retire on your own terms and be confident that you could retire at 60 or even 55.  

The article makes it sound like investing from 63 to 66 will set you up for retirement.  There is no way that 3 years at the end of your career will be able to set you up for retirement.  Let's look at an example to show you what I mean.  In this example, we will invest $7,800 for 3 years.  All calculations are made by calculating a 7% interest rate gain (you can find better performing investments, but I like to estimate low).

Example 1:

Person 1:

  • Began Investing at age 27.
  • Amount Invested monthly: $650 ($7,800 yearly)
  • At age 30, this person stopped investing and let the money sit there for 30 years.
  • At age 60, this person had $210,660.20 (only invested $23,400)

Person 2:

  • Catch up investing began at age 63.
  • Amount Invested monthly: $650 ($7,800 yearly)
  • At age 66, this person will have $25,954.57 (invested $23,400)

The biggest thing that this example shows is that you don't gain much at all by investing late in life.  The person who began investing at age 63 and earned only $2,555, whereas, the early investor earned $187,260.  My basic point is that the 3 extra years of investing won't make you that much money, sure you were able to save an extra $23 grand, but that amount of money doesn't change much.  I need to point out that I don't think it is a good idea to stop investing at age 30.  Instead, you need to invest early and often.  Let's look at one more example of a person who invests the same amount monthly from age 27. Once again a 7% interest rate will be used in the calculation.

Example 2:

  • Began Investing at age 27.
  • Amount Invested monthly: $650 ($7,800 yearly)
  • Continued to invest the same amount from 27 to 60 (33 years)
  • At age 60, this person will have $1,003,641.31 (257,400 invested)

This example shows the importance of investing monthly.  The slow and steady growth of the savings was huge for this person and at age 60, they will have a million dollars.  That's right, it only takes $650 a month to reach $1 million dollars!  I'm sure you can find a way to save $650 a month.  Personally, I believe that you should save as much as possible, but $650 should be your minimum target.  Below, you will see the power of compound interest.  You can increase the amount you invest by just a little bit and the money will start to grow crazy fast. 

Example 3:

  • Investing $700 monthly for 33 years (only $50 extra): $1,080,844.49
  • Investing $800 monthly for 33 years: $1,235,250.85
  • Investing $900 monthly for 33 years: $1,389657.20
  • Investing $1000 monthly for 33 years: $1,544,063.56
  • Investing $1,250 monthly for 33 years: $1,930,079.45
  • Investing $1,500 monthly for 33 years: $2,316,095.34
  • Investing $2,000 monthly for 33 years: $3,088,127.11

The example above was meant to show you how drastic the growth of money will be when you only add a little bit extra to your investments each month.  Can you find just $20 extra to invest monthly?  It can make a big difference!

Just dream for a minute, what would it be like to have $1.5 million dollars at retirement?  Could you live on that?   I think you could.  You wouldn't need to be stuck working for six more years, because you made the smart decision to invest early and often.  You also wouldn't need to rely on Social Security, because you can support yourself.  That is the goal and the hope.  My hope for all americans:  We stop thinking about our current needs and instead start focussing on our future.  We don't have to be stuck working until age 66 like the article suggested.  We can cut unnecessary expenses and increase savings.  This will lead to an ability to retire on our own terms, because we decided to simply save money.  That's all you gotta do is save money.

The article on basically makes it seem like the retirement age increase is a forgone conclusion, but we don't have to fall in this trap!  We all can be millionaires and we can all dictate our retirement, because we will take control of our money!  That's right!  There is hope!  When you have hope, then you can accomplish anything!  Start today, it will only speed up your growth.

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