For many baby boomers, retirement is a dream that’s slipping away.
Several publications have looked at this issue over the past few months, documenting the economic malaise that’s gripping boomers as they advance toward the age of 65 – once a retirement goalpost for many.
The most recent story that caught my attention is by Diane Stafford of The Kansas City Star. She does a good job of telling readers what’s going on – people are delaying retirement and, increasingly, planning to work in retirement – and provides data that puts the trend in context:
“In 1991, just one in 10 workers told the Employee Benefit Research Institute that they planned to wait to retire until they were older than 65. By 2007, three in 10 said that.
“This year? More than four in 10.”
Blame it on an economic downturn that’s thrown older workers out of jobs earlier than they had expected, devastated nest eggs and diminished housing values. (Older adults’ homes are often their single most valuable asset and, when housing loses value, they have fewer resources to get them through their non-working years.)
And blame it on a sea-change in pensions that has left older workers more dependent on 401(k) plans – an unreliable source of income in older age if people don’t contribute faithfully these accounts during middle age. Needless to say, some do but many do not.
Also, let’s not forget the erosion of employer-based health care coverage for retirees, which can result in another economic hit. Without this coverage, people have to pay for their own Medicare supplemental coverage at age 65 and thereafter if they want protection against Medicare deductibles and co-pays – expenses that add up quickly in the event of an illness.
This supplemental coverage isn’t cheap, and rather than shell out the extra dollars older workers are electing to hold on to paychecks and employer-subsidized health insurance for active workers.
“The number of older workers has grown more rapidly than any other age group in the last few years. This year, 18.6 percent of those 65 and older were participating in the labor force, compared with 13 percent in 2002.”
All this isn’t what baby boomers had hoped for, Stafford notes:
“Small wonder that, according to the Pew Research Center, boomers are the gloomiest of all age groups about the health and future of their finances. Boomers were more likely than other age groups to tell Pew researchers that they lost money on investments since the recession hit. Nearly six in 10 said their household finances worsened.”
The solution for some people is to try to have their cake and eat it too: to retire and then find jobs that perhaps aren’t quite as demanding but still bring in extra money. But a strategy that relies on re-entering the workforce is fraught with problems:
“The prospects are dim for older workers who lose their jobs,” said Christine Owens, executive director of the National Employment Law Project. “They have the highest rates of long-term unemployment of any age group.
“The unemployment rate of 55-and-older workers jumped from 3 percent at the end of 2007 to 7.4 percent in 2010 and settled at 6 percent earlier this year.
“Among the 65-and-older group, the jobless rate, which for years was 3 percent to 4 percent, pushed above 7 percent in 2010 before edging down to 6.5 percent this year.”
As is true in so many facets of American life, boomers are facing a gap between the “haves” and the “have-nots.”
Those in the former group have defined-benefit pensions (these pay a guaranteed monthly or annual amount) and retiree health insurance provided by their employers. (Think about state and local workers who engender so much resentment from those who leave a lifetime of employment with nothing similar.) Those in the latter group have few if any savings, no pension, and responsibility for paying a bundle if they want wrap-around coverage for Medicare. (Or, if they decide not to get this coverage, they’ll expose themselves to significant out-of-pocket medical expenses and potential financial risk.)
No wonder that so many reporters are writing about this subject and will be doing so for many years to come.
Recently-published resources that can help if you’re interested in looking into this topic further include:
- Employee Benefit Research Institute Retirement (EBRI) Confidence Survey
- EBRI: Work to Age 70? For many, that still won’t pay for retirement
- Fidelity Investments Estimates that a couple retiring in 2012 Will Pay $240,000 out of pocket in medical expenses throughout retirement
- Transition boomers and Retirement Income Survey
- Center for Retirement Research, Boston College: 2010 Survey of Consumer Finances Suggests Even Greater Retirement Risks
- The New York Times wrote about this issue in a Sept. 15 editorial headlined “The Road to Retirement.” Its conclusion: “Americans by and large cannot afford to retire.” The Times piece drew more than 400 comments, testifying to intense interest in this topic.