Will We Have to Work Forever?

Introduction

Today, the average retirement age is 63. If people continue to retire at 63, they are going to face a severe decline in living standards at retirement for a number of reasons. First, at any given retirement age, Social Security benefits will replace less of pre-retirement earnings as the Normal Retirement Age rises from 65 to 67. Second, Medicare premiums, which are deducted before the Social Security check goes in the mail, are slated to rise dramatically. Third, taxes on Social Security benefits will also rise. In addition, pension coverage in the private sector has shifted from defined benefit plans, where workers receive a life annuity based on years of service and final salary, to 401(k) plans, where individuals are responsible for their own saving and the median balance for individuals approaching retirement is only $60,000…