Single women are especially at risk of exhausting their savings if they quit working too soon, research shows.
For generations, 65 has been widely viewed as the traditional retirement age. But if you stop working when you reach this landmark birthday, there is a good chance you will regret it financially, according to recent research.
Nearly half — 45% — of all Americans who retire at age 65 are likely to run out of money before they die, according to the Morningstar Center for Retirement & Policy Studies.
Morningstar used its new retirement savings simulation tool to determine how long income might last during a typical retirement. The tool makes this estimate based on individual characteristics (such as age, income and savings behavior), health care costs, and projected longevity.
According to the tool, single female retirees are more likely than couples and single males to run out of cash if they retire at 65:
- Single females: 55%
- Couples: 41%
- Single males: 40%
Working longer is perhaps the best way to improve your odds of not running out of cash, Morningstar says.
While acknowledging that “many Americans are unable to or do not want to work later,” Morningstar emphasizes that logging an additional five years in a job can dramatically improve the odds that you will run out of money.
Working longer both decreases the number of years you spend in retirement and gives your retirement savings more time to grow. Working until 70 also gives you an opportunity to delay taking Social Security benefits long enough to ensure you receive the largest possible monthly benefit.
Continuing to earn job-related income until age 70 would mean that just 28% of all retirees would run out of cash before they die.
Here is the breakdown of how many retirees in a particular subset would be likely to run out of money if they retire at age 70:
- Single females: 36%
- Couples: 26%
- Single males: 21%
Of course, it’s important to note that for most Americans, completely running out of money in retirement is exceedingly unlikely. Even if they spend all their assets, most will still receive monthly Social Security benefits for the rest of their lives.
