Maurie Backman

The Motley Fool

Many people look forward to retirement after spending years struggling through the daily grind. Unfortunately, a growing number of Americans may have to wait even longer to make their grand exit from the workforce. Although the average retirement age in the U.S. is just 63, according to a recent study by human resources consulting firm Willis Towers Watson, almost a quarter of Americans believe they won't be able to retire until age 70 or older. Worse yet, 5% are convinced they'll never be able to retire at all.

Even workers who plan to retire at 65 aren't so sure of themselves. Those surveyed admit that, while they'd like to retire at 65, they think there's a 50% chance they'll wind up working until 70.

So why all the negativity? A lot has to do with insufficient savings. With Social Security only designed to replace about 40% of the average American's pre-retirement income, most of us have to save independently to ensure a reasonably comfortable retirement.

Yet an almost frightening one-third of Americans, many of whom are 55 and over, admit to having absolutely no retirement savings whatsoever.

And we're stressed about it, too

For some people, the idea of working longer may not seem like such a bad thing. Financial benefits aside, studies have shown that working longer can actually lead to better health and a longer life. Yet among those surveyed by Willis Towers Watson, 40% of workers who anticipate retiring after age 70 have higher-than-average stress levels. Along these lines, 40% of workers planning to retire at 70 or later feel stuck in their jobs — ouch.

Younger workers are also pessimistic

And it's not just older workers who feel they'll have no choice but to postpone retirement. Almost 25% of employees under 30 think they'll wind up retiring in their 70s or even later. Meanwhile, 28% of workers in their 30s don't think they'll retire before 70, and 33% of 40-somethings feel the same way. It paints a pretty bleak picture, especially considering that younger workers still have a good number of years to save.

Working longer has its perks

While working longer may not be the ideal solution to the retirement-savings crisis, it does have its benefits. For one thing, the more years you put into the workforce, the more opportunities you have to save. Not only that, but working longer shortens the number of years you spend in retirement, which can help your savings go further.

Working longer might also give you continued access to an employer-sponsored health plan where the benefits are superior to those provided by Medicare. And if you're among the many employees whose salary goes up over time, working longer during your peak earning years could increase the amount you get from Social Security once the time comes to collect benefits. Plus, if you're able to hold off on claiming Social Security until age 70, you'll get a major benefits boost in the form of delayed retirement credits.

Of course, this all assumes that you have the option of working until 70 or later. A recent study by Voya Financial confirms that 60% of Americans wind up retiring earlier than planned, due to poor health, job loss, or the need to care for a spouse or dependent. So if your strategy is to hold off on saving when you're younger and compensate by working into your 70s, you may want to rethink that approach.

Save now, retire sooner

If the idea of retiring at 70 or later doesn't sit well with you, your greatest chance of avoiding this fate is to start saving as much money as you can, as early as you can. If you start saving $300 a month at age 25, invest your savings, and generate an average annual return of 8% (which is more than doable with a stock-heavy portfolio), by age 65, you'll have over $932,000 to fund your retirement. Increase that $300 to $400 a month, and you'll have over $1.2 million. But if you wait 10 years to start saving that $300 each month, you'll have just $408,000 by age 65 — a reasonably impressive figure, but less than half of what you would have accumulated had you started saving right away.

No matter what age you're actually planning to retire, your best bet is to save independently for as long as you can. There's really no such thing as having too much money in retirement, and if your savings grow more rapidly than expected, you could always reward yourself by retiring early. It's a far better alternative than rotting away at your desk when you'd rather be calling it quits.

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