Retirement Age: A Term That’s Nearly Lost All of Its Meaning

Retirement age - what does this even mean anymore? Learn why retirement age has nearly lost all of its meaning below. ...
Retirement Age: A Term That’s Nearly Lost All of Its Meaning
Written by Brian Wallace
  • Originally set at 65 years of age, the original retirement age—dictated by the Social Security Act of 1935—applies only to those born in 1935 or earlier. For anyone born after 1959, 67 is considered the “full retirement age.” With the current average life expectancy of 79.05 years, this should give retirees around 12 golden years to enjoy at the end of their lives. And yet, many of the younger generations seem to think these are unrealistic expectations. Quoting everything from the failures of Social Security to higher costs of living, there seems to be a plethora of reasons they think things will go wrong. It would be hard to say that they’re entirely correct, but—unfortunately—it would also be incorrect to say that they’re completely wrong either.

    The Effects of Inflation 

    For a long period of time, having $1m in savings was considered enough for retirement. However, according to a recent study by Wealthcare Financial, inflation will raise the comfortable costs of living up to $120-$150k per year by the time Millennials and Gen Z are able to retire. This means the younger generations must save around $3m if they want to retire comfortably, certainly a daunting task. A Wealthcare Financial report recommends that younger workers save $500k by the time they’re 25, $1m by age 40, $2m by age 50, and hit the $3m mark at 60 years of age.

    Uncertainty & Social Security

    Based on the latest analysis from the Social Security Administration, the program’s funding is predicted to run into major issues by the end of 2034. Rather than paying 100% of the current benefits, the SSA predicts it will only be able to provide retirees with 75%. This conclusion was reached due to an increasingly aging population and a decline in birth rates. There are a few different ways that the SSA may attempt to fix this deficit―such as lowering benefits, raising the retirement age, or increasing taxes―but a set-in-stone plan hasn’t yet been determined. Even assuming this issue is resolved, the current SS retirement benefits are capped at $4,194 for an individual who retires at 70. Unless the government finds a way to significantly raise these benefits, Millennials and Gen Z workers who retire will still need to subsidize the remaining $70-100k of annual expenses on their own.

    Housing Costs

    Another issue the younger generation will be—and already are—facing is housing market inflation. According to the U.S. Census, the median value of a home was $2,938 throughout the 1940s. By the year 2000, it had jumped up to $119,600. Even if you adjust for inflation, the 1940s home would have only cost $30.6k. Of course, prices are much higher these days. In fact, the median home value jumped up an impressive 416% from the 1980s to 2020. Unfortunately, the current median home value of $428.7k isn’t likely to go down by the time the Millenials and Gen Z are ready to retire.

    With these discouraging statistics in mind, renting for life starts to seem like the only option. However (according to recent data from, average rent costs have increased by 8.86% per year since 1980, significantly outpacing wage inflation during the same time frame. With the average rent rates currently exceeding $2,000 per month, a worker must make $6,666 per month to keep rent costs within the recommended 30% budget allotment. This works out to an annual income of nearly $80k; the median weekly earnings in the U.S. are only $1,070 per week ($55,640 per year).

    Preparing for the Future

    As proven time and time again by the statistics above, the younger generations must prepare for retirement immediately. High-yield savings accounts are an excellent place to start, but the meager 1.50% APY they offer isn’t enough to outpace inflation. Rather, these generations will have to make smart investments now if they want to enjoy the benefits of compound interest later on in life.

    Fortunately, it appears that Gen Z has taken the initiative, with workers from this generation saving an average of 14% per year. Millennials—along with baby boomers and Gen Xers—only reported saving an average of 12%. Gen Z is also the most confident group when it comes to retirement, with 69% saying they felt confident in their retirement savings. Most plan to retire at 63.6 years old, which is slightly younger than the anticipated retirement age of other groups.

    Millennials Must Play Catch-up

    As the older generation, Millennials are feeling the pressure more than Gen Z. While some of Gen Z hasn’t even started working yet, some Millennials have only a few more decades before they reach retirement age. Although harrowing, these statistics highlight many of the common complaints often brought up in conversation by the younger members of society, and the takeaway is crystal clear.

    Inflation isn’t helping anyone, so you better start saving now if you’re ever planning to retire.

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