American Dream

America’s Rising Retirement Age: Why Is It So Hard to Retire?

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The average retirement age in America is rising. Almost four in 10 Americans plan to work past age 65, according to a Gallup poll conducted in April 2015. That’s nearly three times the number of respondents who gave this answer two decades ago. While some seniors choose to work for mental stimulation and social interaction, many are forced to because they need regular paychecks to pay the bills. Why is it so hard for American workers to retire?

Rising Health Care Costs

One reason Americans are retiring later is concern over the affordability of medical expenses. Advances in health care are helping people live longer, but the associated costs of care have grown exponentially.

Seniors who assume Medicare will take care of them could end up facing a harsh reality: AARP highlights Fidelity Investments’ estimates that predict a 65-year-old couple will spend $240,000 on medical care during their retirement years for expenses not covered by Medicare. This can include copays, optional doctor visits, prescription medications, dental visits, and eyeglasses. Looking at that number alone, it’s not surprising that many Americans decide to keep working.

Fewer Pension Plans

Gone are the days when a worker could put in 30 years and retire with a guaranteed monthly check. Today, most companies have replaced pensions with defined retirement contribution plans such as 401(k)s. While these plans can be great for high earners or for those who are meticulous about their savings, many workers fail to save enough because short-term expenses are deemed more important. A number of employees also pulled their investments out of the stock market when 401(k) balances nose-dived during the Great Recession; they didn’t get to experience the gains that occurred as the markets recovered.

Greater Debt

In past years, it was typical for a senior citizen to hold little-to-no debt and to have paid off a mortgage before leaving the workforce. Today, more seniors are nearing retirement age with the burden of debt.

Thirty percent of homeowners over the age of 65 owed mortgage debt in 2011, according to the Consumer Financial Protection Bureau, up from 22 percent in 2001. Consumer debt has also grown tremendously among seniors over the past decade. A 2012 study from Demos reveals that Americans over age 50 now carry more credit card debt that younger workers, and that one-third of older households use credit cards to meet monthly expenses.

Retirement Taxes

Many people assume that after retirement, they’ll owe fewer taxes because of their lowered income. However, the amount of money seniors may need for health care expenses and debt repayment could end up being the same or greater than what they paid during employment. Money that comes out of certain retirement plans to pay for these expenses could be subject to income taxes, and retirees might not qualify for the same deductions as in previous years. Taking taxes into consideration, retirement account balances aren’t worth their face value, forcing some seniors to continue working or to take on part-time jobs to help make ends meet.

Bringing Retirement Age Within Reach

While seniors who choose to work are often happier than their retired counterparts, those who are forced to work out of financial necessity don’t fare nearly as well. Fortunately, seniors have options to bring retirement within their reach.

Downsizing or moving to an area with a low cost of living can greatly help with debt repayment and monthly expenses. By cutting housing costs and living in a tax-friendly retirement state, seniors are more likely to enjoy their golden years instead of watching retirement move further out of reach.

Kim Parr is a private practice optometrist by day and financial writer/blogger by night. She lives in Southwest Colorado with her husband and daughter who all share a love of travel, the outdoors, and finding ways to earn passive income to retire early. Her writing has been featured on Business Insider, Life Hacker,  Mint, and