In 1992, a group of people in their late 50s were asked what chance they had of living to 75. Researchers then followed the study’s participants to see how many accurately predicted their demise.
Where are we going? To the problem of retirement saving.
Almost half of the people who thought they had no chance of seeing age 75 were wrong. Forty-nine percent of them made it. At the other end, among the individuals who were pretty sure they would be alive at 75, close to 80 percent were correct.
We are living longer. Below, you can see that for individuals who were 60 in 2010, the median (middle value, not the average) is 81 for a man and 84 for a woman. But a hefty number will live longer, and perhaps much longer. Living to age 86 would not be unusual for a man as well as 92 and beyond for a woman.
How we save:
You can see below how retirement savings vary by income quartile. While the bottom 50 percent depends primarily on Social Security, for higher income individuals, Social Security represents 18.1 percent of their income.
Are we saving enough?
According to the National Retirement Risk Index, 51 percent of all households have not saved enough to equal their pre-retirement standard of living after they retire. However, a Boston College group of researchers concluded that by working until they are 70 instead of 65, over 85 percent of all households will be prepared to retire with satisfactory income.
Our Bottom Line: Micro and Macro Implications
A growing proportion of the population will be 65 and older. In 2000, the aged, totaling 35 million people, was 12.4 percent of the U.S. population population (35 million). Now, estimates take us to 47.7 million people or 14.8 percent of the U.S. population who are 65 or older. And, at 72.8 million individuals, that proportion will touch 20.3 percent in 2030.
So, we have a major demographic shift that takes us to individual and macro life cycle planning.
On the individual level, a study from MIT suggests we think of the elderly population as three groups. The lowest income group is Social Security dependent; the middle group might require additional retirement savings vehicles and incentives and the most affluent group that has more opportunities to save.
On the national level Social Security, Medicare and Medicaid will be increasingly fiscally challenged as the elderly population expands.