Not Retiring Is the New Retirement Plan For Many

CalculatedRiskBlog tells us about a new major study of American workers and their retirement plans.  The study is published by the Transamerica Center for Retirement Studies [note for students: the center is an excellent source of research data and analysis].  CalculatedRisks summarizes:

From Rachel Ensign at the WSJ: For Many Seniors, There May Be No Retirement

Already battered nest eggs took another beating this month with the market’s wild swings. With interest rates essentially at zero since 2008, income from Treasurys and certificates of deposit is pretty paltry. … On top of that, housing prices [leave] homeowners with much less equity to tap.

Here is the survey mentioned in the article: The New Retirement: Working

• The survey found that for many Americans, the foundation of their retirement strategy is simply not to retire, to work considerably longer than the traditionalretirement age, or work in retirement:
–39 percent of workers plan to work past age 70 or do not plan to retire
–54 percent of workers expect to plan to continue working when they retire
–40 percent now expect to work longer and retire at an older age since the recession

• Workers’ greatest fears about retirement include “outliving my savings and investments” and “not being able to meet the financial needs of my family.”

• Most workers will continue working out of financial necessity:
–Workers estimate their retirement savings needs at $600,000 (median), but in comparison, fewer than one-third (30 percent) have currently saved more than $100,000 in all household retirement accounts
–Most workers, regardless of age or household income, agree that they could work until age 65 and still not have enough money saved to meet their retirement needs
–Of those who plan on working past the traditional retirement age of 65, the most commonly cited reasons are of need versus choice
–Many workers (31 percent) anticipate that they will need to provide financial support to family members

When I looked at the report myself, I was struck by this line in the executive summary:

Workers’ greatest fears about retirement include “outliving my savings and investments” and “not being able to meet the financial needs of my family.”

This is related to the point I’ve tried to make in the past (and also here  and here):  Social Security is not a pension plan. Social Security is an insurance program that insures all of us against the possibility of “outliving our savings and investments”.  It is particularly disturbing to hear politicians and those least likely to outlive their investments be in such a hurry to cut Social Security (or Medicare) at a time when uncertainty about investments and savings is rising (just look at the uncertain stock market and housing markets)!

Unemployment for Boomers (45-65): Highest Ever

One the greater tragedies of the Great Financial Meltdown  (2007-2009 edition) is not just that unemployment rose to such high levels.  (that was is bad).  It’s not just that the unemployment has stayed high and will take years to get return to full employmnent given the weak policy responses (that’s worse).  It’s not even that the unemployed workers are staying unemployed for unprecedented long periods – creating a public health hazard and personal disasters. (that’s unconscionably worse).

No, it’s even worse than all this.  It’s the tragedy of destroying valuable human capital and wasting what should be/ could the most productive years of many people’s lives.  And, in so doing, jeopardizing their retirement, which in turn has negative impacts on the next couple generations.

From Calculated Risk on Nearing Retirement and Unemployed or Underemployed:

One of the groups seriously impacted by the great recession is the “pre retirement” generation – currently the “Baby Boomers” – the workers between the ages of 45 and 64.

Pre-retirement Unemployment Rate Click on graph for larger image in new window.

This graph shows the unemployment rates for two groups: 45 to 54 (seasonally adjusted), and 55 to 64 (only NSA data is available).

The unemployment rate for these age groups hit an all time high during the great recession (highest since WWII).

Michael Winerip at the NY Times has a story about the plight of several “Boomers” who he has tracked for the last year: Time, It Turns Out, Isn’t on Their Side (ht Ann)

A YEAR ago, I wrote about a job fair at the Sheraton in Midtown Manhattan, where over 5,000 mainly white collar, middle-aged jobless men and women waited in the cold for more than two hours, hoping to find work. …

For that column, I interviewed two dozen boomers. Given recent reports from the federal government and Manpower, the employment agency, that the hiring outlook is beginning to improve, I thought it would be worthwhile to go back to those highly motivated people. …

The short answer is, of the 16 I interviewed again, 9 describe themselves as still struggling. Eight continue to be unemployed or are working part-time jobs that pay near minimum wage. Several were so concerned about bias, they did not want to give their ages. …

Of the 16, only one, Mr. Kramer, who was unemployed eight months before being hired in July as a closing manager at a Best Yet supermarket, has found a job that pays more than his old position. More typical of the seven who’ve found full-time work is Ben Brief, 60, a printing supervisor, who’d been jobless two months when I interviewed him on Sixth Avenue in the 20-degree weather. Mr. Brief was out of work nine more months, before finding a printing job that paid 20 percent less than his previous position. “I’m glad to be working, but people know they can pay you a lot less in this economy,” he said.Kind of hard to sing “Yeah, time time time is on my side …” when you are 60 and unemployed or underemployed

More on Employment & Older Americans: They’re Looking for Work

My earlier post about sources 0f income for older Americans pointed out how it’s really earned income, money from working a job, that separates the upper income quartile of older Americans from the other 75% of older Americans with less income.  That alone blows a big hole in the image/myth of American retirement based on a balance of pension/social security/investments.

But now comes news that it’s getting harder to get that job.  The NYTimes notes at Number of Job Hunters 65 or Older Skyrockets that:

In fact, there are more Americans 65 and older in the job market today than at any time in history, 6.6 million, compared with 4.1 million in 2001.

Less well known, though, is that nearly half a million workers 65 and older want to work but cannot find a job — more than five times the level early this decade and this group’s highest unemployment level since the Great Depression.

The situation is made more dire because of numerous recent trends: many people over 65 have lost their jobs as seniority protections have weakened, and like most other Americans, a higher percentage of them took on debt than in previous generations.

Unfortunately, a near perfect storm is developing.  Demographics are bringing an increase in the absolute & relative numbers of older Americans as boomers age.  But the U.S. economy has lost it’s job-creating mojo.  It took 4 years to recover job-wise from the very mild, short recession of 2001.  The signs are that even if a recovery in GDP is underway now from the disastrous 2007-09 Great Recession, that job-creation isn’t happening and isn’t likely for awhile.   Not encouraging.