Working beyond traditional retirement age
More middle-class workers anticipate working past their full retirement age (FRA). According to the TCRS, among those who are not yet retired, almost half of people in the middle class (49%) expect to work beyond the traditional retirement age, including 34% who expect to retire after age 65 and 15% who do not plan to retire.
More than half (52%) also plan to continue working after they retire, in an effort to afford their retirement. While 45% expect their primary source of retirement income to come from 401(k)s, 403(b)s, or individual retirement accounts (IRAs), 27% say Social Security will be their leading source of income. This is even more of a reason for Congress and policy workers to form a solution on Social Security’s impending insolvency, notes Collinson.
“If there is going to be reform that is going to affect someone’s benefits, it’s better that they get nine to 10 years notice than four years notice, because retirement planning is a long-term commitment and if you’re nearing retirement and operating on one set of assumptions and a major variable change shortly before retirement age, it doesn’t give you much time to adjust your plans,” she said.
Another growing source of income are annuity options, which have piqued the interest of middle-class Americans in recent years. A 2022 Survey of Owners or Individual Annuity Contracts, commissioned by Greenwald Research and the Committee of Annuity Insurers, found that middle-class Americans were the likeliest to take out an annuity.
It’s a viable option for workers, but as with any other financial product, Collinson underlines the importance of working with financial professionals to understand whether a lifetime income tool is the best fit. “For those looking for some tax-advantages, certainly annuities and other guaranteed lifetime income options are in the mix,” she said. “The key is that [participants] do their homework and understand which is best for their situation.”
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.