Late retirement is becoming a necessity for increasing numbers of older Americans amid the financial crisis. Before the turmoil on Wall Street decimated many retirement portfolios, in a survey conducted last year for a report released by the AARP last week, 70 percent of older workers said that they would retire late for lack of money. There is little doubt that this number has increased since the survey was conducted.

"With people's knee-jerk reaction in looking at both the economy and looking at their own finances, working longer may be the only way to get themselves to remain financially secure," said Deborah Russell, director of work-force issues at AARP. With retirement accounts taking a beating, a simple look at a retirement planning calculator will likely show that people need to work several more years to make up the difference. In addition more people are taking their money out of stocks and other investments out of fear and putting it into low yield things like savings accounts — which also lengthens the time needed to reach their retirement goals.

Late retirement complicates matters for the entire workforce and employers. Older workers may be costlier in terms of salary and benefits, and in an effect some have called "the gray ceiling" younger workers will have fewer opportunities as fewer and fewer elders retire at the previously anticipated age.

"A lot of younger people are waiting for those good jobs. To the extent that older people are not giving up those jobs, that's going to cause problems," said Richard Johnson, researcher at the Urban Institute in Washington.

If older Americans want to keep their jobs, they need to be assertive in doing so in the face of these many pressures on employers. Director of the Center for Retirement Research at Boston College, Alicia Munnell, advises, "Control what you can control. We can't do much about the craziness in the market, but you certainly can control, in many cases, how long you're going to work....We thought that was the right answer even before the financial crisis. Everything has just intensified since then."

Source: Reuters via NPR

Labels: gray ceiling, Job Market, Retirees, Retirement Planning

When most people think of their retirement years, they picture themselves traveling, relaxing and enjoying hobbies they had less time for when they worked--or even finding some new hobbies.

But, with the U.S. economy floundering as it is, many people are putting such plans on hold.

"As the economy slows and prices rise, most middle-aged and older respondents report that they are having difficulty paying for food, gas, utilities, and medicine, and are responding to the situation by cutting luxuries and postponing major purchases and travel," according to a recent study by the AARP.

Some people are even postponing retirement itself. 27 percent of American workers aged 45 or older have postponed their plans to retire in response to the economy, according to the study.

Even more troubling is that one in four have trouble paying their mortgage and rent, and that one in three have stopped putting any money into their retirement accounts. And nearly one in four--23 percent--have prematurely withdrawn funds from their 401(k) or IRA.

But, with costs rising as they are, many people simply have fewer dollars to save. Making ends meet is tough for many, with the costs for necessities rising as they are. "Majorities are having trouble paying for essential items such as food, gas and medicine or utilities such as heating, cooling and phone service," according to the study.

Labels: Baby Boomers, Economy, Retirement Planning

Americans love instant gratification. That's why so many are in credit card debt (more on that in a future post) and that's why so many save so little (see our previous article on Americans' Negative Savings Rate).

This preference for devoting resources to the present rather than the future apparently starts young.

According to a study released by the Government Accountability Office (GAO) in December 2007, 36.8 percent of workers who are 17 years old now will have absolutely no money in a 401(k) or similar retirement plan when the time comes for them to retire.

According to a CNN article on the study, "Only 36 percent of workers in 2004 participated in 401(k)s and similar accounts when offered."

With Social Security up in the air and pensions becoming increasingly rare, workers are basically left to plan their retirement on their own by contributing to a 401(k), IRA or both. There are even self-directed IRAs and self-directed 401(k)s for those who want to really take the reins of planning for their retirement.

Unfortunately, it seems that many workers are paralyzed by the idea of planning for their retirement. So, rather than face the stress of the decision-making process, so they do nothing about it. And hope for the best, I guess.

"GAO found that automatically enrolling workers in 401(k)s and similar plans would cut the number of those without money in those plans to 17.7 percent," according to CNN. "Automatic enrollment would halve the number of low income workers with zero retirement dollars from 63 percent to 30 percent."

The GAO is not the only one reporting on the trend. The Employee Benefit Research Institute (EBRI) released a report last November that found that participation in employment-based retirement plans decreased from 40.9 percent of all workers in 2005 to 39.7 percent of all workers in 2006.

"The EBRI report found certain characteristics were associated with a lower level of participation in a retirement plan, such as being non-white, younger, female, never married, having a lower educational attainment, lower earnings, poorer health status, no health insurance through an employer, not working full time, not working full year, and working in service occupations or in farming, fisheries and forestry occupations," according to The Wenatchee World.

The bottom line, though, is that everyone needs to plan ahead and save for retirement. Not only do they need to save, they need to invest in such a way as to outpace inflation. Otherwise, they won't have any money when they want to retire. Hoping to win the lottery at age 64, for example, is just bad "strategery."

Labels: Personal Finance, Retirement Planning, Workforce, Young Workers