With increasing longevity and fewer retirement income sources to count on, personal savings will become an increasingly important component of retirement income. However, personal savings rates have not increased, which means that many people may have to discard traditional views about retiring at age 65 and continue to work for longer periods.
With improved health and less physical jobs, this may not be such a burden for older individuals. By working longer periods, individuals will be able to save more, increase their benefits with Social Security and pension plans, and start to withdraw savings at a later age.
One study looked at annual income after taxes and health insurance premiums for a typical man at age 75 who retires at various ages. If he retired at age 62, he could expect annual net income of $17,338, compared to $22,920 if he retired at age 65, $27,256 if he retired at age 67, and $34,790 if he retired at age 70 (Source: Working Longer to Enhance Retirement Security, September 2005).