Friday, September 26, 2008

Delayed Retirement for Boomers? Depends on What You Mean by "Retirement"

As the mortgage-driven financial meltdown incinerates hundreds of billions of dollars of housing equity and stock market valuations, millions of Baby Boomers are realizing they haven’t set aside enough savings to retire early. They probably didn’t have enough to retire early in the first place – they just didn’t know it. Now they know it.

Further, according to an article in the Sept. 22, 2008, Wall Street Journal, “Baby Boomers Delay Retirement,” they’re resigning themselves to working longer. Writes Kelly Greene:

We'll see more and more people postpone” their retirement dates, says Helga Cuthbert, a certified financial planner in Decatur, Ga., who spent a good part of last week fielding telephone calls from nervous investors. “Their expectations about the future and the kinds of returns they would get [on their savings] were simply unrealistic.”
While the article makes an important point (it's one of our favorite themes), it misses a critical change in sentiment: For a majority of Boomers, “retirement” isn’t the finish line. It’s just another phase of life – a slower-paced phase, perhaps -- in which Boomers make a different trade-off between “work” and “leisure.” The changes induced by the panic on Wall Street may not be as traumatic as the Journal implies.

To be sure, by the traditional standards of financial planners, Boomers are terribly unprepared for retirement. Only 23 percent of workers age 55 and older have savings and investments totaling $250,000 or more, according to an April study published by the Employee Benefit Research Institute. Three out of five have nest eggs smaller than $100,000.

Financial planners urge people to consider delaying their retirement a few years so they can accumulate more assets and shorten the time frame they’ll have to live off their savings. As it happens, that’s what many Boomers are planning anyway.

According to research we’ve conducted at the Boomer Project, about one third of Boomers say they have no idea when they’ll retire, and another one third say they’ll continue working when they retire – whenever that is. In other words, for a majority of Boomers, “retirement” is not the major life event it was for the GI generation and the Silent generation.

For many, “retirement” represents a chance to drop out of the rat race and do something more fulfilling, whether it’s working for a not-for-profit or converting a hobby into a small business. “Retirement” provides an opportunity to recalibrate the needle in the work-life balance to a setting that affords more time for leisure and travel – but still entails some work. In the back of their minds, many Boomers see themselves as continuing to work, earning a paycheck to supplement their pension and savings, for a good portion of their retirement.

Bottom line: As Baby Boomers plan their golden years, their mental calculus is likely to be far more nuanced than the Wall Street Journal article gives them credit for.

3 comments:

CathyS said...

I now define 'retirement' as a shift from primarily focusing on earning a living. People may still need to earn money, but it's no longer the objective.

Cathy Warren said...

The reality is that Boomers and Seniors either retired or near retirement are finding it necessary to supplement their incomes in-order to maintain their current standard of living. The mind-set is changing about retirement. Remaining productive and in the mainstream has many advantages, financial stability is one, and self fulfilment is another. These experienced and knowledgeable people continue to contribute to society on every level.

Laurie Neumann said...

I would like to suggest for those who still need to earn additional income during retirement to consider starting a home based business. That way, you would still have some flexibiility in your work schedule, you can live wherever you want, and can travel (and either take time off or take your business with you if it's an internet business.)

A business that you have an interest in can also add a sense of purpose during those "changing years."

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