Market crash delays plans for retirees
Hearing that older workers will likely be retiring later wasn't unexpected news to operators of retirement communities. They probably see that scenario as inevitable following the disastrous turn the financial market took last year.
A survey released last month by Watson Wyatt, a global financial consulting firm, revealed that 34 percent of the country's workers have decided to delay their retirement dates. That number rises to 44 percent for workers between the ages of 50 to 64 — the key baby-boomer generation that retirement communities have been counting on and preparing for.
Instead of retiring at age 65, half of the older workers told Watson Wyatt they won't even begin to consider leaving the work force until they've turned at least 66. More than half — 54 percent — said they now plan to work at least three years longer than they initially intended.
Here are the major reasons older workers cited for delaying retirement:
- 76 percent decided to push back their plans to retire because the value of their 401(k) accounts has fallen and they have fewer savings.
- 63 percent reported the high cost of health care.
- 62 percent said higher prices for basic necessities are keeping them on the job longer.
"The economic crisis has affected many workers' retirement plans and nest eggs, but those nearest to retirement have been especially hard hit," said David Speier, Watson Wyatt senior retirement consultant, in a release.
"Older workers do not have the time to offset declining retirement account values, either by recouping their investment losses or significantly increasing their savings rate. For many, the only choice is to delay retirement," he added.
Playing a role in the decision is the worker's retirement plan.
The survey found that those with a defined-contribution plan from their employers were more likely to put off retiring than those with a defined-benefit plan. Only 26 percent of workers with defined-contribution plans, including 401(k)s, felt they could retire before the age of 65, while 41 percent with defined-benefits plans thought they might be able to take early retirement.
"DB plans provide predictable benefits and offer workers incentives to retire at a certain age, whereas DC plans could encourage workers to work longer just when companies are trying to reduce the size of their work force," said Lisa Canafax, senior retirement consultant at Watson Wyatt.
"The time is ripe for employers to take a close look at their existing retirement program to make sure it meets the needs of both workers and employers," she said.
Watson Wyatt surveyed 2,200 full-time workers in February and released the findings in June.
In related news, Watson Wyatt analyzed the pension disclosures from the 100 largest pension sponsors in the nation last March and found that aggregate funding fell by $303 billion last year, going from a surplus of $86 billion at the end of 2007 to a deficit of $217 billion at the end of last year. Overall, collective funding levels fell by 30 percentage points — from 109 percent funded at the end of 2007 to 79 percent funded at the end of 2008.
"Plan sponsors were hit hard with a double whammy in 2008 with severe market declines and new funding rules coming into effect," said Speier. "This combination will require employers to make staggering pension contributions over the next couple of years, at a time when they can least afford them."
Watson Wyatt has an office in Grand Rapids at 3196 Kraft Ave. SE.