A prosperous retirement doesn’t always follow a prosperous work life, but let’s face it, it doesn’t hurt! Even if you haven’t had a lifetime of high income, a few simple rules can make a big difference in retirement at any income level: live below your means, avoid debt, save as much as you can, invest well and if your employer has a matching plan for retirement accounts, maximize your contributions.
However, some people would rather retire later and work more. That is assuming that their health is good and they don't need to take Social Security before age 66.
As Wealth Advisor explains in its recent article, “How Much Do You Need To Retire? One Big Bonus,” the more education you have, the more flexibility you’ll have when it comes to working more and saving more. That's the conclusion of a recent study by the Center for Retirement Research at Boston College, which confirms the findings of earlier research.
Education as a work-longevity bonus has been known for a while. However, in recent years, the gap between high school and college-educated workers has broadened. For instance, from 1976-79, the average retirement age was 64 years for high school grads, and almost 65 years for college graduates. By 2010 (through 2016), college grads retired around 66, while those with a high school diploma were retiring earlier than they did nearly 40 years at age 63.
Although this three-year gap between the groups doesn't sound like a big deal, in terms of a demographic divide, it's massive. Those working longer tend to save more, mostly because they’re typically earning more.
Along with gains in longevity and overall medical care, the more educated person usually enjoys a longer period of prosperity in retirement. While this looks like a nice story for those with more education, it also reveals some of the underlying woes of the labor market.
College graduates typically earn more than high school grads, have better healthcare, more disposable income, and are less likely to leave the workforce due to illness or injury. One of the reasons people retire early, is because they’re disabled, suffering from chronic illness, or take Social Security at 62 because they lost their job and can’t get hired.
Education is a major factor in the longevity divide. Education improves employability, and a higher income typically raises lifetime income. Not incurring debt for college degrees that don't bring a higher salary, is also a benefit.
One of the best ways to improve retirement finance security is simply to work longer—even a few more years can have a major impact. Considering that the length of retirement has dramatically increased, this is becoming a necessity for more people. If you are thinking about returning to school for a college degree or an advanced degree, remember that an area of study that will make you more valuable in the workplace, is more likely to boost your income and your retirement.
Reference: Wealth Advisor (June 5, 2018) “How Much Do You Need To Retire? One Big Bonus”