Say Goodbye to 65, Retirement Age is Increasing

Published on June 29, 2012

Since 2011, the number of Baby Boomers reaching retirement age has been steadily increasing. The Pew Research Center, a nonpartisan fact tank, has calculated that every day for the next 18 years, about 10,000 more retirees will join the 65 or older population. This means the US retirement population will increase by 5% by 2030. That’s an additional 65.7 million retirees!

The Organization for Economic Co-operation and Development (OECD), a Paris-based economic think tank, has found that life expectancy is rising at a greater pace than the increase in Social Security retirement age—which means that governments will not be able to fulfill promises made regarding Social Security benefits. According to a CNN Money article, it is expected that the United States government will only be able to pay Social Security benefits in full until 2033. With life expectancy increasing, some prominent think tanks, including OECD, believe that it is imperative to increase the retirement age as well.

Currently, the full retirement age in the United States has increased to 66, from 65. Starting in 2012, it is scheduled to increase by two months annually until it reaches age 67 in 2022. However, while the full retirement age has been slowly increasing, the early retirement age is still at 62, when retirees can collect on a percentage of their full benefits.

OECD believes that a cure to the increased life expectancy and the growing number of retirees is to raise the full retirement age gradually to 70 years-old. This could assist in plugging the $165 billion Social Security deficit expected by the end of 2012. As reported by the Congressional Budget Office in January, making 70 the new 65 could help reduce Social security outlays by 13%.

Some experts believe that the workforce population needs to start planning for their retirement sooner and investing smarter in order to counteract the Social Security crisis.  Juan Yermo, head of the private pensions unit at OECD stated, “With the fact that people are living longer, they should be partly responsible for meeting the cost of longer life expectancy.”

Given the concerns over Social Security payouts and the likelihood of a longer retirement period, it is essential to build your investment portfolio with the best ways for you to invest your savings as you prepare yourself for retirement. Whether it means buying stocks or opening a self-directed IRA, it’s crucial for retirees to know what their options are for both traditional and nontraditional investing.

Building retirement through a self-directed IRA is an example of a nontraditional retirement plan. Through a self-directed IRA, people are able to invest in more than just stocks and bonds—they can invest their retirement funds in real estate, precious metals, notes, mortgages, hedge funds, and so much more. These alternative investments—in which individuals might already be investing outside of their IRA—offer a more diverse spectrum of opportunities for investors who are looking to control their own futures and retirement accounts. People who choose to invest for retirement through a self-directed IRA (whether it be a traditional or Roth IRA, or an employer’s SIMPLE IRA or SEP IRA) use a third-party administrator who keeps track of all transactions, assets, fees, and documentation to make their investing life a little easier! Simply put, the investors manage all their investment decisions while the administrator manages all the paperwork.

“Nobody wants to be told that they have to work longer to get the same pension,” Yermo said, “but it’s the inevitable result of the demographic challenges we’re facing.”

Want to read the entire CNN Money article? Click here.