Consider the changes in retirement between you and your grandparents. When the national retirement age of 65 was established for the Social Security Act in 1935 (78 years ago!), the average American lifespan was 61.7 years. The age of 65 was chosen at that time because it was beyond the average life expectancy for Americans. While there certainly were exceptions, most Americans of 1935 aged 65 or more were in poor physical condition and were unable to earn a living. In fact, the average 65-year-old American of those days was... DEAD!
Again, I am talking about averages. We all know of exceptions, but financial planning by the actuaries at the Social Security Administration is based on averages.
NOTE: Actuaries are the individuals who determine the rate of accidents, sickness, death and other events, according to probabilities that are based on statistical records. Actuaries then use trend information to predict future averages.
Today, we still think of retirement age as 65, but the average lifespan of Americans is now 78 years — 16 years more than it was when Social Security started. The impact is enormous.
Most Americans now expect to draw Social Security payments for years, something our grandparents never expected. That alone may explain a lot when thinking about the present and future financial problems of Social Security!
Is it reasonable for you to expect government payments at so young an age? Our grandparents didn't expect retirement checks until several years after they reached the average life expectancy. If we use the same philosophy today with an average life expectancy of 78 years, we shouldn't expect retirement until age 80 or beyond! After all, that's effectively what our grandparents expected.
In fact, many Americans are already postponing retirement until several years after age 65. The news media is full of information about various studies that show many Americans switching careers in their senior years and remaining productive in the workforce until into their seventies and beyond.
What are your plans? Are you planning to retire to a rocking chair at age 65? Or will you switch to a second career and keep busy earning an income for several more years?