Why the average retirement age is rising

About half of today’s working-age households will not be able to maintain their standard of living in retirement. Social Security will provide less relative to pre-retirement earnings; 401(k) balances are meager; and half the private sector workforce does not have an employer-sponsored plan. At the same time, with rising life expectancy the number of years spent in retirement has increased dramatically, health care costs are high and rapidly rising, and interest rates are at historic lows.

Retirees are in trouble.

Three changes can alter the bleak outlook: encourage people to work longer; make it easy for homeowners to tap their home equity; and cover the uncovered through some type of auto-IRA program. This blog post provides a checkup on the working-longer lever by looking at recent numbers on the average retirement age — the age at which the labor force participation rate drops below 50%.

From the beginning of the 20th century, the labor force participation of older men had declined steadily until the mid-1980s, when it gradually began to increase. As a result, the average retirement age for men has slowly risen from a low of 62 in 1985 to almost 65 in 2015. This upswing is bringing their average retirement age back to levels not seen since the 1960s.

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