It’s common to hear people say, “Fifty is the new forty” or even “Sixty is the new forty.”
For the record, this isn’t some kind of “new math.” It’s a way of saying that people are doing certain things later in life—the kinds of things previously reserved for younger adults. Think of your neighbor who just decided to change careers—at 55! Or your single work colleague in her early fifties who is adopting. Or consider the increasing number of seniors who are taking up running.
There’s a version of this when it comes to retirement. We could phrase it “Seventy is the new 65.”
In other words, many people are postponing retirement and working a few extra years. Why? The four dominant reasons for this paradigm shift are economy, longevity, uncertainty, and tendency.
Economy. Unless you’ve been living off the grid for the last ten years, you know the current economy is anything but predictable. With our world now so interconnected, trouble anywhere—war, an outbreak–often results in trouble everywhere.
“Okay, but look at how the markets have steadily risen over the last decade. The S&P 500 was around 2,000 a decade ago; today, it’s just over 5,500!”
That’s true. But stocks aren’t the only things going up. Other things have risen too…things like inflation, interest rates, the cost of housing, and debt.
Here’s one disturbing truth: Since the end of World War II, America has been on a non-stop borrowing binge (governmentally, corporately, and personally). Debt, of course, isn’t intrinsically good or bad. It’s like electricity—you need to be super careful with it!
Economist John Mauldin estimates that when America’s “debt-super-cycle” started (around 1960), we got $5 of benefit from $1 of debt we took on. That’s smart business. But by 2011, Mauldin estimates we were only getting 50 cents of benefit from every dollar of debt we take on. Clearly the juice has been squeezed out of that lemon.
For the foreseeable future, the U.S. economy will need to focus on addressing this debt problem. That means financial returns could be stymied in coming years.
Longevity. Retirees are living longer. According to Guardian Life, since 1970, the average length of retirement for women has risen from 16.6 years to 21.3 years. For men, retirement has increased from an average of 12.8 years to 18.6 years.
This increase in life span carries with it the necessity of building a nest egg with staying power. Given the uncertainties surrounding the global economy, most of us will need to amass more retirement savings. That means extra years of working and saving.
Uncertainty. Most retirees rely heavily on Social Security, and yet the future of Social Security is murky. The system is now on pace to run out of reserves in 2035. Since the proposed fixes—tax increases, benefit cuts, and/or raising the retirement age—are all unpopular, it’s unclear what our elected officials will do. But they have to do something, or many seniors will find themselves having to live longer with less benefits.
Tendency. Despite a renewed emphasis on the importance of frugality, personal saving rates have steadily dropped over the last six decades, from 11.3% in January 1959, to 3.9% in May 2024. During that same period, consumer spending has steadily risen—dipping only during the Covid pandemic.
Most people enter retirement with only a vague thought that “I need to figure out a way to spend less.” However, when I ask folks specifically where they plan to cut their spending, I get blank stares and silence.
The grim reality is that most people are not willing to make the changes necessary to be able to retire early. It’s for this reason—and all the rest—that when it comes to retirement, 70 is the new 65. More and more people are waiting to call it quits.
Speaking of retirement, you may also be wondering about your best options for turning your retirement assets into regular retirement income. If so, I have a free gift for you. It’s this link to take a short quiz called the RISA (which stands for Retirement Income Strategy Assessment). The RISA can help you figure out what financial strategy is best for you in life’s next chapter.
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