Working til age 70 won’t be enough for people not yet prepared for retirement, according to the Employee Benefit Research Institute, contrary to a Center for Retirement Research study released in July which failed to factor in the high costs of long-term nursing home care.
Instead, many Americans will have to work well into their 70s and 80s in order to have adequate retirement income, the EBRI researchers found.
Staying in the workforce a few years past the traditional retirement age of 65 should be enough for 86% of households to enjoy a “comfortable retirement,” the Center for Retirement Research had said in its report. Waiting to claim Social Security benefits, saving longer, allowing interest on those savings and other investments to compound, and financing fewer retirement years were named as ways working until age 70 could significantly improve retirement readiness.
But it’s not that simple—or that quick, asserts Jack VanDerhei, research director for EBRI and author of the report.
“You’re not going to magically be fine if you work a few more years,” he says.
What the CRR didn’t factor into its report is the “prohibitively high” costs of long-term skilled nursing care, which isn’t covered by Medicare, and is only covered by Medicaid in some cases. VanDerhei included the probability of nursing home expenses in his report, leading him to a much different—and less optimistic—conclusion.
While it would be “comforting” from a public policy standpoint to assume working that extra five years to age 70 is enough to attain retirement readiness, says EBRI, it may be a “particularly risky strategy, especially for the vulnerable group of low-income workers.”
Results from a 2011 study indicate that the lowest pre-retirement income quartile would need to defer retirement to age 84 before 90% of the households would have a 50% chance of success.
The report details the different baselines used by the Center for Retirement Research and the EBRI, which led to the disparate conclusions.
“Different methodologies will produce different results, but both studies agree that working longer will help improve retirement security,” said Andrew Eschtruth, communications director for the CRR, in an email to EBRI.
Check out the EBRI study findings.
Written by Alyssa Gerace