Study: Just Working Longer Not Enough To Cover Retirement Expenses

You know you haven't saved enough for retirement and stock losses have made your mediocre retirement portfolio worse. “No problem,” you think to yourself, “I'll just work a few years longer than I planned.”

 You might still have a problem. A new study by the Employee Benefit Research Institute (EBRI) finds that if Baby Boomers and Gen Xers work past age 65, they would still experience a retirement shortfall unless that otherwise save and invest.

 Even delaying retirement into your 80s might not be enough to provide an adequate nest egg, the study finds.

High health care costs

As you might expect, the complicating factor is health care. As costs skyrocket, it's hard to keep up. Assuming that Medicare survives, the cost of supplemental coverage, to pay for what Medicare doesn't, will become ever more expensive.

“Our research finds that many people may have to delay retirement far beyond age 65 to increase the probability that they will have enough money to cover their retirement at a comfortable level,” said Jack VanDerhei, EBRI's research director and co-author of the report.

Just to be clear, we're not talking about having enough money in retirement to raise horses, start a vineyard or travel the world. We're talking basic living expenses.

Current income a factor

How much money you make now also makes a difference. The report found that of those in the lowest income group, only 29.6 percent would have enough money to avoid running short in retirement 50 percent of the time. Delaying retirement to age 69 only adds 13 percent more households to the group that will be adequately funded.

But the outlook is not hopeless.

 “What really makes a positive difference, we found is if people who continue to work after age 65 also continue to contribute to a defined contribution retirement plan,” VanDerhei said.

The analysis is based on data of EBRI's Retirement Security Projection Model, designed to provide an assessment of national retirement income prospects. This year, for the first time, the analysis included an assumption that individuals would continue working past age 65.