Retirement was more easily attainable in the past; you worked, earned your gold watch, and sailed off into the sunset. Unfortunately, that’s simply not the case for our generation nor the future generations to come.

In this post, we explore what’s changed over the past few decades and why it’s more important than ever to begin planning for retirement at the appropriate age. Let’s dive in.

The burden of retirement has shifted away from employers

Traditional pensions are fully funded by employers and give retired workers a fixed monthly benefit for life. The benefit amount is generally tied to compensation and years of service, and what’s more, payout option plans often include joint and survivor plans that allow widowed spouses to receive a percentage of benefit payments for the rest of his/her life.

This was generally the case for anyone who worked 50 years ago and was offered a retirement plan by an employer, but over the last several decades, pension beneficiaries have steadily declined. To illustrate, data published by the Monthly Labor Review revealed that 41% of private sector workers were covered by pensions in 1960—with coverage reaching a high of 46% in 1980.

However, as labor unions began losing power in the 80s, companies started adopting new programs such as 401(k)s—which were much easier and less expensive for organizations to offer. Fast forward a few years to 2008 when the Social Security Administration website claimed that only 20% of workers participated in a pension plan. Today, pensions are no longer commonplace; data from the Bureau of Labor of Statistics shows that less than 15% of private industry workers had access to one in 2022.

The trend toward pension extinction has shaken up the American retirement system as fewer workers are entering retirement with a guaranteed source of income aside from Social Security. As a result, the retirement savings burden has shifted almost entirely to the employee.

The future of Social Security is uncertain

Speaking of Social Security, stats don’t lie: America is aging. Approximately 16.8% of America falls within the oldest demographic (age 65+), based on the most recent census. With the Bureau of Labor Statistics projecting that about 20% of Americans will fall into this category by 2040, the federal government will thus need to pay out additional benefits.

Exacerbating this problem is a glaring issue outlined in a recent Social Security Administration report: we’re living longer and having fewer kids, funneling less money into the system over time and creating a subsequent funding gap for future retirees.

Congress has tossed around possible solutions to help bridge this gap, including increasing the full retirement age (the age in which you’re entitled to receive 100% of your benefits) or reducing benefits to wealthier recipients; time will tell as to which solution(s) are eventually passed into law. Without the safety net of Social Security, however, it’s more imperative than ever for future retirees to have access to additional sources of income during retirement.

Many Americans are drowning in debt

Simply put, the more debt you have, the more challenging it is to save for retirement—and Americans are deeper in debt than they were years ago. There are several reasons why including inflation rising much faster than wages, easier access to credit, and less aversion to debt.

Harvard Business Review recently reported that average hourly inflation-adjusted wages have risen just 0.2% per year since the early 1970s. In contrast, consumer prices typically increased 2% or more annually over that same time period (per the U.S. Bureau of Labor Statistics). This significant disparity makes it challenging for many Americans to even tread water, which is particularly problematic for low- and middle-income households.

Analyze college tuition and fee data from the past 20 years and you’ll see these numbers have grown twice as fast as the consumer price index (CPI)—reflecting what Americans pay for goods and services—according to bestcolleges.com. Likewise, credit.com reports that over 43.5 million Americans carry an average of $37,787 in student loan debt: 107% higher than in 2007.

Easier access to credit—particularly with credit cards—is another impetus driving recent debt trends.

In February 2024, the Federal Reserve Bank of New York reported that credit card debt rose to a record $1.13 trillion at the end of 2023 (for the sake of comparison, that number was $690 billion in Q1 2003). Credit card delinquencies—the amount of time in which cardholders fall behind in making payments—also increased. To break it down even further, we reviewed a recent TransUnion report that stated the average amount of debt per cardholder was almost $7,000 in Q1 of 2023—with people in their 40s carrying the most debt overall ($7,600).

Older Americans are also carrying debt into retirement; a recent Harvard Joint Center for Housing Studies report claims that 46% of homeowners between the ages of 65 and 79 (and one in every four people aged 80+) are still paying off a mortgage. This is a marked difference from a few decades prior, as 34% of those aged 65-79 (and 3% aged 80+) had mortgages back in 1990.

Carrying significant debt means those impacted likely need to work much longer than they had originally anticipated and, therefore, potentially miss out on the chance to enjoy the retirement lifestyle they envisioned.

Healthcare costs continue to climb

Fidelity recently reported that the average 65-year-old couple would need to spend almost $315,000 in after-tax money to cover healthcare expenses in retirement. This number is even more alarming when compared against a 2010 Boston College Center for Retirement Research (CRR) study that claimed the average 65-year-old couple could expect to spend $197,000 over their lifetimes (with a 5% chance this could exceed $311,000). Neither estimate accounts for long-term care expenses, which certainly aren’t insignificant.

Unfortunately, this concerning trend is unlikely to change—especially when you analyze the demographics of American citizens (as mentioned earlier, we’re an aging population). The Congressional Budget Office projects the “65 or older” age segment will outpace the growth of younger age groups for a very long time, with the additional demand for healthcare services fueling price increases.

Adult children are assuming more responsibility

Duke University School of Nursing published an article detailing how adult children are increasingly taking on the responsibility of caring for elderly parents (aging Baby Boomers, specifically) who wish to maintain a sense of independence in their homes.

While caregiving is admirable, related responsibilities are often problematic—especially with respect to finances. That’s because these caregivers often don’t work (or work less than they did), which means less money to sock away for retirement. According to AARP, 17% of the adult population (including spouses) cares for an adult over the age of 50: resulting in an estimated $600 billion in unpaid labor.

What’s more, a recent Retirement Confidence Survey (RCS) conducted by the Employee Benefits Research Institute and Greenwald Research found that caregivers are more likely to have fewer assets and more debt than non-caregivers.

The paradox of investment choice

Have extra funds to invest outside of workplace benefit plans? You aren’t lacking in options; from traditional IRAs, Roth IRAs, ETFs, and real estate to individual stocks and mutual funds, myriad choices are at your disposal that investors lacked decades ago.

While access to countless types of investment vehicles benefits many Americans, it’s overwhelming for others. Consequently, significant investment decisions get put on the back burner for the latter segment due to a fear of making the incorrect decision—which can result in missed opportunities to build wealth or, even worse, complete inaction.

Workplace benefits vary

Enjoying access to a retirement plan at work not only makes it a little easier to make investment decisions (see previous section) but also encourages you to save. Beginning in 2025, automatic enrollment in employer 401(k) and 403(b) retirement plans will be required for eligible employees.

According to recent census data analyzed by the Economic Innovation Group, however, over half of the nation’s workforce (56%) are employed by a company that doesn’t offer a retirement plan (meaning they must save for retirement 100% on their own). Furthermore, an inability to take advantage of employer-sponsored retirement plan tax benefits makes this an even bigger hurdle to overcome for many working Americans.

More people will likely need long-term care

Long-term care (LTC) is defined as help you may need with “activities of daily living” (or ADLs) due to injury, health, or cognitive impairment such as dementia, memory loss, or Alzheimer’s. Such activities include bathing, dressing, eating, toileting, continence, and transferring (walking or moving oneself from a bed).

According to the U.S. Department of Health and Human Services, someone celebrating a 65th birthday today has an almost 70% chance of needing some form of long-term care (LTC) services in his or her remaining years. What’s more, women are expected to need 3.7 years of care compared to 2.2 years for men, and an estimated 20% of today’s 65-year-olds will require care for longer than five years.

Based on this data, long-term care expenses will likely impact your retirement plan; so you’ll need to plan accordingly, especially considering cost-of-care sticker prices for services such as home health aides and assisted living facilities.

In sum: why it’s more difficult than ever to save for retirement

While saving and planning for retirement might seem daunting, it is possible to enjoy your dream retirement. The key is a well-executed game plan, which is precisely why we encourage you to work with a financial advisor (ideally a CFP® professional) who can help give you the clarity and guidance you need to make smart financial decisions.

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Why Planning for Retirement is More Complicated Today