Dilemmas of Retirement

Retirement After 62 and Financial Situation

Retirement After 62 and Coming Financial Situation

Too many Americans in middle age and beyond seem to be relying on the Social Security System to fund their retirement. It was never intended to be a complete solution and the signs are that it is not likely to be in the future. Indeed funds are dwindling. Fewer people are paying in at the same time as more are claiming. Without a significant injection of extra funding benefits will need to fall by as much as 25% by 2030 for the System to continue in any effective form. That extra funding is not popular in Congress where both houses have Republican majorities so the future is uncertain.

The System does allow claimants to start taking benefits at 62 but those that do so will be opting for a monthly check that will forever remain 25% below the check that the same claimant would receive at 66. Most will advise claimants to wait until 66 because with life expectancy rising there could be a significant difference between what an individual can receive overall during their retirement.

Retire at 62

There are some cases where that advice may not apply of course:

  • Those people who will receive reduced Social Security when their government pension starts at 65 may as well have 3 years where there is no such reduction. It may well offset the difference described above.
  • Those who claim based upon the employment history of a spouse can see their benefits reduce in a similar way.
  • Those in really poor health, even with limited life expectancy may as well start taking benefits as soon as they are available.


A recent study into retirement and how people feel about it is disturbing. The Employee Benefit Research Institute (EBRI) states that less than half of those responding have tried to work out how much money they will need when they retire, and many more are just guessing with no basis in fact. This study taken together with a report from the New York Federal Reserve recently which identifies the level of debt amongst the age group 50 and over as rising makes poor reading.

Average Debt

Some debt is better than others of course. Mortgages should help borrowers increase their assets with real estate recovering after the recession but there have been several years when mortgages have no increased that asset value. The Reserve broke the figures into different forms of debt:

  • The average mortgage debt of a 65 year old has risen from £27,000 in 2013 to a present day $40,000, a rise of 47%.
  • Auto loan debt has risen from $3,000 to $3,800 over the same period, a 29% increase so we must consider reasonable rates & bad credit installment lending to repay all.
  • Fortunately credit card debt seems to have evened out though anyone carrying credit card debt and about to retire is likely to find it hard to finance a balance and the high interest rate that incurs each month.

The Prospect of Retirement

A far less scientific survey talked to people in New York about how they viewed retirement. Some had already retired and others were about to do so. Some were fine but others saw no realistic prospect of retiring until they were forced to do so. Many envisaged working part time in some capacity for the foreseeable future simply because they did not have a significant retirement fund and Social Security was plainly inadequate.

The Survey of Household Economics and Decision Making published by the Fed in 2014 stated that 30% had no retirement savings at all. Some had equity in their real estate but often not sufficient to make a significant difference in their lives. If they were to sell up and release the equity they would still have to find somewhere else to live and pay rent.

There is clearly a massive problem because even though the US Economy has improved since the end of the recession with unemployment falling from double figures back below 5% it is not so healthy that it can sustain jobs, full and part time, for those passing normal retirement age as well as placing everyone else finishing education and looking for work.

Broad Age Groups

For those in their latest working years and without good retirement, time is too short for them to save enough to solve their problems. The benefits they will receive under the Social Security System will not fund a comfortable retirement with no chance of receiving close to $20.000 annually. That puts recipients well inside the 'poor' category.

Those in middle age and doing little currently will need to make drastic changes to their lifestyle. In order to get close to building a fund for retirement that may be sufficient they will have to start to save 20% of their income. How realistic is that if those people are currently living from pay check to pay check?

It is the young that still have the chance to manage their finances in such a way that they start to build an emergency fund and retirement provision, saving regularly every month. Whether they have student loans to repay or not, failure to do so will do nothing for the health and well- being of American Society which is currently facing enormous problems.

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