Even as stock prices rise, unemployment drops and overall recovery takes hold, more U.S. workers than ever are planning to delay retirement, according to a 2012 report from The Conference Board, an independent business membership and research association.
“It’s disconcerting that the two years in which the U.S. economy seemed to finally, if fitfully, turn the corner also left so many more workers compelled to change their retirement plans late in their careers,” said Gad Levanon, director of macroeconomic research at The Conference Board. “This may benefit some businesses and industries by reducing labor shortages and skill gaps as experienced workers stick around. At the same time, their delaying retirement can be a significant obstacle to the many companies seeking to cut costs. Mapping out the implications of the trend for individual firms and the economy as a whole means first understanding the drivers behind workers’ retirement decisions.”
Dark Times Leave Long Shadows
Plans to delay retirement increased across all regional, ethnic, gender and income lines, as more older workers prepare to extend their daily grind.
A major factor in the growth of their numbers, the report finds, is the continued depletion of savings. The U.S. recession officially ended in July 2009, and the stock market has rebounded strongly since then. In 2012, however, 62 percent of 45- to 60-year-olds reported at least a 20 percent decline in the value of their financial assets since the start of the crisis—up from 42 percent in 2010.
“The cumulative effect of drawing down assets in hard times—including the loss of future gains during the recovery—helps explain the current plight of older workers,” said Conference Board researcher Ben Cheng in the same release. “Even as economic conditions improve, many are still relying on assets to get by. And even those who’ve made it through the worst find themselves needing to work past retirement age to rebuild savings.”
Retirement-Income Expectations Fall
Interest rates on savings accounts, certificates of deposit, government bonds and other vehicles have dropped significantly since 2010. With low yields expected to continue into the foreseeable future, workers may be pushing back retirement in anticipation of smaller returns on their financial assets.
Similarly, the generation-long shift from defined benefit pension plans to 401(k)-type defined contribution plans—alongside changes in Social Security and the increasing scarcity of postretirement employee health benefits—may be giving Americans an incentive to work longer, as retirees shoulder more of the risk than in decades past, the report found.
Finally, better health and life expectancy have, quite apart from the recession-related jump of recent years, pushed retirement age steadily higher since the 1990s. People expect to live longer and fuller past age 65—and need more wealth to do so.
Workers Planning to Work Longer to Keep Health Coverage
More than half of all U.S. workers (53 percent) intend to work longer than they would like in order to keep their health insurance at work, according to findings from the 2012 Health Confidence Survey (HCS), sponsored by the not-for-profit Employee Benefit Research Institute (EBRI) and Mathew Greenwald and Associates.
However, the actual experience of retirees suggests that may be wishful thinking: Only 19 percent of retirees indicated they were actually able to work longer to continue receiving health insurance through their jobs.
According to EBRI, it is estimated that a 65-year-old couple, both with median drug expenses, would need $163,000 set aside in 2012 to have a 50 percent chance of having enough money to cover health care expenses (excluding long-term care) in retirement, and $283,000 to have a 90 percent chance of doing so.
Stephen Miller, CEBS, is an online editor/manager for SHRM.
Generation X Most Concerned About Financing Retirement, SHRM Online Benefits, October 2012
Employers Doubtful of Employees’ Retirement Readiness, SHRM Online Benefits, October 2012
Age-Based Savings Benchmarks, SHRM Online Benefits, September 2012
Work to Age 70? For Many, That Won’t Be Enough, SHRM Online Benefits, September 2012
Encourage Employees to Defer Adequate Pay to a 401(k), SHRM Online Benefits, May 2012
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