Retirement: Just how much longer will I have to work?
There are many financial advantages to delaying retirement and working longer. You shorten the period you will have to support yourself in retirement, avoid a reduction in Social Security benefits, can contribute more to your 401(k), and have more time to accumulate earnings on your investments.
But, compared with today's retirees, just how much longer will we have to work to get the same financial benefits? Is two months enough? A year? A decade?
Researchers at the Center for Retirement Research at Boston College think they have the answer. In the paper "Will we have to work forever?" Alicia Munnell, Marric Buessing, Mauricio Soto, and Steven Sass calculated exactly how much longer someone who retires in 2030 will have to work to compensate for an increase in the age at which you can claim full Social Security benefits, projected increases in the Medicare Part B premium as a percentage of the Social Security benefit, and likely income taxes on these benefits compared with someone who retired in 2002.
Their number: 3.5 years.
"It's not forever," says Soto, a senior research associate at Boston College and coauthor of the paper. "A worker who retires in 2030 will have to work about 3 ½ years longer to compensate for all the changes in Social Security, Medicare, and taxation."
If you were born in 1960 or later, you are not eligible for full Social Security benefits until age 67. Thus, in order to receive the same level of benefits as retirees today, you will have to work an additional two years. The projected reduction of your Social Security benefits directed toward your Medicare Part B premium will take six months of additional work to reverse. And the researches calculated that 13 more months of work will be necessary to compensate for projected taxes on your benefits. Thus, an additional 3.5 years of work will counteract all the projected changes in Social Security. Granted, you don't have to wait until age 67 to begin collecting Social Security. You can start at age 62, but if you cash in before your full retirement age, your benefits are permanently reduced.
Don't feel like working longer? You'd better contribute to a 401(k) plan and develop other financial assets if you want to have a standard of living comparable to similar retirees today. The Boston College researchers found that workers who wish to retire in 2030 who have significant 401(k) accumulations will have to work only slightly more than two additional years to duplicate the amount of income replaced in retirement by Social Security received by workers who retired in 2002.
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