Do You Plan on Working Until You're 70? If So, Then This May Surprise You

By Todd

Data source: Unsplash via Pixabay.

A recent survey by Wells Fargo offers insight into the current state of retirement in America and one of the study's findings calls into question whether workers who are planning on staying at their job until they're 70 years will be able to.

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Specifically, the study found that roughly half of current retirees who had planned on working until they turned 70 were forced to retire early for reasons that were outside of their control.

Retirement: An emerging crisisWhen asked about the current state of retirement in America, 70% of retirees say that retirement in America is in a "crisis state" and 81% of workers age 40 years and older agree.

A major reason why so many Americans are worrying about retirement is because pensions are vanishing and workers aren't saving at a rate that's high enough to offset the drop in income that's likely to occur in retirement.

Financial planners suggest that the average American should have enough income to replace between 70% and 80% of their pre-retirement wages, yet according to Wells Fargo, the average person in their 60s has saved a median $50,000.

That's not going to be enough for most retiring Americans because it's typically recommended that retirees withdraw no more than 4% of their retirement savings annually for income. Therefore, a person with $50,000 put away would only be able to pocket only about $2,000 in income from their retirement savings per year during retirement.

Add that $2,000 to the $16,000 that the average person is receiving from Social Security and you can see how easily costs can outstrip income, especially for Americans who must also pay for health issues.

Investing sooner, working longerAmerica's retirement crisis has more people starting to save earlier in their career and planning to retire later in life.

According to Wells Fargo's poll, the average American worker age 55 to 59 began saving for retirement when they were 31 years old, a full six years sooner than the typical person in their 60s. Also, roughly half of people in their 60s plan on working at least until they turn 70 -- a decision that's likely heavily influenced by Social Security rules.

Although Social Security can be taken as early as age 62, the age at which a person receives their full monthly retirement benefit ranges between 65 and 67 years, depending on the year in which a person was born, and delaying Social Security until age 70 results in the biggest Social Security benefit.

According to the Social Security Administration, the average person born between 1943 and 1954 that waits until turning 70 before taking Social Security will receive payments equal to about 132% of the full retirement benefit that they would otherwise have received at age 66.

Flies in the ointmentOn the surface, working until age 70 when you can claim a larger Social Security benefit would seem wise. However, Wells Fargo found that a significant number of retirees were forced to stop working earlier than planned.

The most common reason why retirees stopped working was their health, but employers were also to blame. Overall, 37% of retirees reported that failing health resulted in their early retirement while 21% reported that they stopped working because of an employer decision. Frighteningly, only 7% of people who retired earlier than planned did so because they said they had an adequate amount of money set aside.

That suggests that a retirement strategy that includes working up until the bigger Social Security payments kick in may not be the best approach.

Data source: Wells Fargo.

Addressing the problemSince workers may be forced out of their jobs sooner than they'd like, it's critical to save as much money as possible, for as long as possible.

One of the simplest ways to do this is to take advantage of tax-advantaged retirement plans, such as 401(k) plans and IRAs. Investing in these plans as early in a career as possible can lead to a much larger retirement account at age 65 because of the power of compounding interest or the ability for interest on money invested to earn interest over time.

For example, the median retirement account for a person in their late 50s that began investing at age 31 totals $150,000 or roughly three times the amount of money that a person in their 60s that began investing at age 37 has in their account. Although no one knows what the future may hold for retirement or the markets, having that much more money at retirement could go a long way toward ensuring financial security, especially if your plans for working later in life fail to pan out.

The article Do You Plan on Working Until You're 70? If So, Then This May Surprise You originally appeared on

Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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