As many of you will remember, i wrote about the fact that individuals will continue to work longer past retirement age, why they will, and what happens when they do so. Now we are seeing it reported here in the States. Aivars Lode
IT’S not your grandfather’s retirement, not nearly as cut and dried. It’s not the simple picture of stopping work at 60 or 65, moving to Florida and devoting oneself to golf and bridge — not that it was ever totally that.
Nowadays retirement is all over the map. It’s blurred, more elastic. Many people retire piecemeal. Or they retire and then unretire. Or they continue working well after they were supposed to have retired.
As part of a fast-changing retirement picture, many Americans leave their longtime job, but then, fearing that their Social Security benefits and nest egg will prove too small, plunge into part-time work — as a consultant, say, or a salesclerk at a big-box store. Others step down from career jobs but then conclude, after a year or two, that they are bored and want to start their own businesses. So they unretire and become entrepreneurs.
Not long ago, it seems, the typical American’s goal was to retire at 58, 60, 62 — certainly no later than 65. But now, more workers are pushing back retirement to 68, 70, 72 and even later.
Some delay retirement because they are still healthy and love to work. But many put it off instead because their 401(k)’s are so puny, or because their medical bills, even with Medicare, are so high. Or some delay because their stock portfolios haven’t fully recovered from Wall Street’s swoon five years ago, despite new highs set on the stock market last week — nominal records spurred by low-interest-rate policies that have at the same time hurt retirement savings.
Some baby boomers understand all too well why they are called the sandwich generation: they need to continue working far longer than they intended, either because the bill for sending their children to college is so steep or because the cost of keeping a parent in a nursing home is so high — or both.
Another twist is that many more Americans are living into their late 80s and 90s — and many of them are outliving their retirement savings. Some companies are rushing to plug this hole by offering annuities that don’t begin until age 80 or 85. The retirement picture in the United States has become so fluid that one survey found that while 43 percent of Americans say they can’t wait to retire, 41 percent don’t expect to ever retire at all.
“There’s no consensus on what retirement is anymore,” said Marcie Pitt-Catsouphes, director of the Sloan Center on Aging and Work at Boston College. “We’re starting to rethink it. Truly, today’s grandparents are not like my grandparents. The experience of aging is different. People say, ‘I’m not done yet.’ ”
That’s certainly the case for Leon Burzynski, 71, an electrician for 35 years before retiring from full-time work eight years ago. Mr. Burzynski, a father of seven who lives in Pewaukee, Wis., said his Social Security benefits and $16,000 yearly pension were not enough to pay for living expenses, a secondary health insurance plan and the elder hostel vacations that he and his wife love to take.
So he has taken on two part-time jobs, earning about $4,000 a year doing bookkeeping for several small companies and $6,000 a year helping with returns during the peak tax season at an accounting firm where one of his sons is a managing partner.
“On one hand, I would like not to have to work, and on the other hand, it gives me something to do,” Mr. Burzynski said. “It’s kind of yin and yang. It allows my wife and me to maintain the quality of life that’s consistent with what we’ve always loved — to go to the theater, the symphony and to take trips.”
While retirement has assumed myriad forms across the country, many economists and other experts on retirement see some common, increasingly worrisome trends. A growing number of workers are convinced they will not have a comfortable retirement. A Boston College study in October found that 53 percent of Americans were “at risk” of being unable to maintain their pre-retirement standard of living once they retire, up from 30 percent in 1989. A study last May by the Employee Benefit Research Institute found that 44 percent may not have enough money to meet their basic needs in retirement.
It is well known that many workers live paycheck to paycheck and find it hard to save much for retirement. A result is that one-third of retirees in the United States rely solely on Social Security, with benefits averaging just over $15,000 a year for an individual and $30,000 for a couple.
A generation ago, most workers with employer-based retirement plans were enrolled in traditional pension plans promising a monthly stipend for life after retirement. Now, just 26 percent of all workers are in such pension plans, including 17 percent of private-sector workers, according to the Bureau of Labor Statistics. Most people whose employers offer retirement plans are enrolled in 401(k)’s instead, and 58 percent of workers are not participating in an employer-based retirement plan, according to the Center for Retirement Research at Boston College.
Most American workers with 401(k) plans save far too little to assure an adequate retirement. The Federal Reserve found that the typical household with workers aged 55 to 64 had a combined $120,000 in 401(k)’s and Individual Retirement Accounts. If that amount were used for an annuity, it would pay out only $6,000 or so a year. Added to the average Social Security benefit, that would come to just $21,000 a year in retirement income for an individual, or $36,000 for a couple with both receiving Social Security.
If America’s vision of retirement might once have been called “On Golden Pond,” it would now more likely be called “On Thin Ice.”
“If you look at my parents’ time, the rules were pretty simple: you got a job, you stayed in that job and when you got to 65 or so, you stopped working, and the money kept coming in through your pension and you had a nice nest egg, and that was the program,” said Neil Kelliher, who, at 71, continues to work as an executive consultant in New York. “It happened with nearly everybody. Then our generation came along, and somewhere along the line they moved the cheese.”
Retirement experts seem unanimous on one piece of advice: most American workers, whether in their 30s or their 60s, have two choices if they want to assure they have enough to retire on. They must either save more or work more years than they planned, and if they do neither, their retirement future may be bleak indeed.
“The baby boomer generation is the first generation of Americans that will probably do worse than their parents in keeping their standard of living in retirement,” said Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis at the New School.
Among the reasons, she said, is that compared with their parents’ generation, fewer retirees today have traditional pensions, and far more have mortgages and sizable credit-card debt.
No doubt such a downbeat retirement outlook will puzzle many of those heartened by the stock market’s new highs. But many economists say the soaring market mainly benefits households in the top fifth by income, while those in the bottom two-fifths are hardly helped because they own very little in stocks, directly or indirectly.
“It’s certainly good to have the stock market move up,” said Alicia H. Munnell, director of the Center for Retirement Research at Boston College, the nation’s leading research center on retirement. She said Wall Street’s surge had probably lifted the average retirement savings in households with workers aged 55 to 64 to $135,000 from the $120,000 that the Federal Reserve reported.
“The difference between $120,000 and $135,000 is very, very small, considering people’s needs for retirement,” Dr. Munnell said. “The big problem is people need multiples of their income to have any chance of security in retirement. Generally, their balances equal one times their income. So $135,000 is some improvement, but it’s not a lot.”
Many retirement experts say Americans, at least those who don’t have pensions, need to save eight to 12 times their annual income to assure a comfortable retirement. That can mean anything from $400,000 to far more than $1 million. A new study by the Employee Benefit Research Institute found that just 22 percent of households with workers aged 55 to 64 had retirement savings of more than $250,000.
Dr. Munnell said the retirement picture is also complicated by the good news of increasing longevity. “The expected life expectancy when one turns 65 is another 20 years,” she said. Indeed, for couples retiring at age 65, there is a 50 percent chance that one spouse will live to 92.
“That means many of us have to support ourselves for 20 years or more with no wage income coming in,” she said. “We can’t afford to do that. We have to make that period shorter. That’s why I’m a maniac about saying people have to work longer.”
Many have gotten the message. According to the Employee Benefit Research Institute, 26 percent of Americans say they do not plan to retire until age 70 or later, up from 12 percent in 2002. And just 24 percent say they plan to retire before age 65, down from 50 percent two decades ago.
Miguel Gaona had hoped to retire at 65. That was five years ago. But every day around 8 a.m., he can still be seen opening up his barbershop in Bethesda, Md.
The reason he hasn’t retired is simple, he explained: “Not enough money saved up.” Mr. Gaona, who emigrated from Paraguay in 1972, said he had saved less than he had hoped because he had a child in college and because “there is a lot of competition in the barber business all over Bethesda.”
Mr. Gaona, who runs the barbershop with his wife, Maria, and a nephew, said he planned to retire in two years, at 72. But even then, he might not. “I love working,” he said. “I enjoy people.”
By contrast, Jeff Bastable retired according to plan — two Thursdays ago, at 66. That evening, he visited his 93-year-old mother and then headed out on a Caribbean cruise. Mr. Bastable, a Syracuse resident who spent decades as a hospital executive before becoming a top fund-raiser for the American Cancer Society, does not foresee a retirement of golf for himself.
Rather, he and his wife, Susan, who founded the nursing department at Le Moyne College in Syracuse, have gotten involved with charities in Africa. They recently traveled to Ghana with 12 nurses to provide expertise and teach at hospitals and clinics.
“It was a profound experience,” said Mr. Bastable, who said he and his wife had solid pensions and retirement savings. “There are lot of things on my list to do. I want to make the world a tad better. I’m already working on a number of things to follow up on this Ghana experience.”
Sara Rix, an analyst at the AARP Public Policy Institute, said one reason many people were working longer was that they realized they were living longer than previous generations. “People tend to underestimate how long they’re going to live,” Ms. Rix said. “In the back of people’s minds, what’s percolating is, ‘I might not die at 82. I may hang on past 82. What am I going to live on?’ They read about people staying in the labor force longer. That’s making people begin to re-evaluate what they’re doing. They’re telling themselves, ‘Maybe I should be doing the same thing.’ ”
Seeing this increase in longevity, some financial companies are pushing a new type of annuity that can help retirees who live longer than they expected — and longer than it takes for them to draw down their nest egg. These annuities, commonly called longevity insurance, are often structured so that they do not begin making monthly payments until one reaches 80 or 85.
Some retirement experts say such insurance is a good idea, for instance, for those who worry that they might spend down their 401(k) by their 80s. An “advanced life deferred annuity” allows retirees to fine-tune how to spend their retirement savings, knowing that these payments will kick in at a certain point. The downside is that people who may pay $50,000 or more in premiums to have an annuity begin at age 85 may die before then.
“It’s all about having absolute confidence that you have a sustainable strategy,” said Matt Grove, vice president in charge of annuity products at the insurer New York Life. “We basically give the money from those who die early to those who die late. That means everyone gets a higher income than they would be able to have on their own.”
When it comes to retirement, Jack VanDerhei, research director at the Employee Benefit Research Institute, sees a tale of two Americas: one of fortunate workers whose employers offer retirement plans, whether traditional pensions or 401(k)’s with matching employer contributions, and one of unlucky workers who do not get a major boost from employers to have an adequate retirement plan.
“There’s a huge bifurcation between those who have worked a long time for such employers and those who haven’t, and it’s going to be hard for those who haven’t,” Mr. VanDerhei said.
Maureen O’Brien, who retired last year at 65, is one of the lucky ones. She was the top tax auditor for the state of Alaska for a decade and later became head of tax compliance for a $400 million trucking company.
In the late 1990s, Ms. O’Brien said, she was planning to retire in 2000 or so, around age 53, helped by a stock portfolio of more than $1 million. But then the tech bubble burst, and her portfolio plunged by two-thirds.
In 2007, history repeated itself. She was again thinking of retiring, at age 60. But then, she said, “the market went down so much, it took probably half my savings. That’s when I went to work for the trucking company.”
But now she is happily retired, having spent a two-month vacation last year on the French Riviera. She nonetheless works one month a year for the trucking company, doing its tax returns for 40 different states — not because she needs the money, but out of loyalty.
Despite her hefty retirement portfolio, Ms. O’Brien still worries. “Having been through two stock market dives, you always know that’s a possibility,” she said. And if that happens again, she says, she might just unretire.