A Case for Retiring Later

People are living longer and saving less, so the longtime retirement age of 65 isn’t practical, according to Alicia Munnell of the Center for Retirement Research at Boston College. She has a new book coming out on the subject and recently did an interview with Morningstar.com to discuss the book.

1. Morningstar: So, is the problem more due to people’s current savings rate or to this increase in life expectancy?
2. Munnell: I think it’s probably equal [in that you have] growing retirement needs because of increased life expectancy and rapidly rising health-care costs and low returns on assets, all things which would make you think that people are going to need a bigger pile [of money]. Social Security is also going to provide relatively less [for some retirees]. … As the full retirement age increases and goes from 65 to 66 to 67, the amount that you get at 65 decreases. It goes as an actuarial adjustment, but it’s equivalent to a cut in benefits. So, it can manifest itself one of two ways: Either you wait until the new retirement age to get your benefit, in which case you get [the full] benefit, or you take your benefit when you would have otherwise and you get a smaller amount.