Want a secure retirement? Pay attention!

Want a secure retirement? Pay attention!

For many of us, the number in mind when it comes to retirement age is probably 65. But it should be 62.

That’s the median age when people in America retire, according to the latest survey from the Employee Benefit Research Institute, which has been doing this homework annually for the last 34 years.

It’s not hard to guess where the numbers come from: 62 is the earliest age for Social Security eligibility, and 65 is when Americans are eligible for Medicare. Earlier retirement seems to be the preference in EBRI’s estimation.

That affects how many years of retirement income people should plan for. In a recent report on the EBRI study, The Wall Street Journal points out that most retirees quit work before age 65 and also work less after retirement than they originally expected. And some 75 percent told researchers they’ll do some kind of post-retirement work for pay, the report says, while only 30 percent of retirees had actually done so.

Getting ready for retirement

Some sage advice applies here: The earlier you think seriously about retirement, the less anxiety you’ll have when it’s time to retire.

The New York Times Magazine recently ran a number of articles on retirement, including an entertaining guide to planning for your financial life after work. It’s less a step-by-step list of things to do than a useful map to what you should be thinking about and how to start putting your strategy together.

You can also dig into the overall numbers through this feature in The Wall Street Journal about how much money you’ll need in retirement. If you’re young and you’re not worried about it, this is the time to jump in. It’s better than starting to worry when it’s too late to save and invest.

What about inflation?

Inflation affects your retirement, whether you’re already retired or not. It cuts into your buying power — a particular problem for those on fixed incomes. That payment from a pension, Social Security, or savings doesn’t go as far as it would without inflation flaring.

Higher withdrawals from retirement accounts would cause a 14.2 percent decline in the financial health held by middle-class retirees, in researchers’ estimation, between 2021 and 2025, according to a recent study from Boston College as reported by The Wall Street Journal. More than one-fifth of retirees and near-retirees raised their withdrawal rates by an average of $1,810 between 2021 and 2023, researchers noted.

Inflation’s higher prices lowered the amount near-retirees saved, and increased what they spent from previous savings, according to the study, titled “What risks do near retirees and retirees face from inflation, and how do they react?”

“The results show that high inflation generally harms older households, but the magnitude of the impact depends on two offsetting factors: 1) the extent to which income and investments keep pace with rising prices; and 2) the amount of fixed-rate debt held by the household, which declines in real terms as inflation rises,” the researchers wrote.

Political interference in pensions

Unfortunately, a number of political groups are interjecting politics into the investment decisions and processes that ensure public employees reliant upon pension funds will be able to retire securely.   Of late, many of these groups, including some that count various state treasurers and comptrollers as their members, have become outspoken advocates and proponents of anti-ESG laws and regulations designed to blacklist banks and investment advisers who base their financial decisions in part on environmental, social, and governance factors.

Investment decisions should not be a partisan matter. 

Most Americans want investment decisions to be made by actual financial experts, including some of the banks and asset managers who have found themselves on the other side of politically driven boycott lists.  Instead of letting the experts  do what they’re supposed to do — manage finances to maximize financial performance — many of these political actors are instead trying to force financial entities to adopt the specific investment criteria or policies those politicians favor.

Advisors to public pensions ought to be in the business of growing retirement and savings and achieving the best returns for retirement investors that align with the goals of the pension funds they serve. Their duty is to current and future retirees, not to politics and politicians.

Similarly, banks that handle public finance — underwriting debt issues for infrastructure, for example — ought to be judged on their price and their service, not on their politics or statements from executives at those institutions. Injecting politics into the equation reduces the number and quality of bidders for those public contracts and ultimately costs taxpayers money. It’s both divisive and expensive.

As Americans consider the age at which they plan to retire, and the size of the nest eggs they need to accumulate, there is an additional item they need to worry about: whether their banks or pension funds will find themselves on the wrong end of a political debate.