For many, retirement dreams now deferred
A decade ago, Christopher Thornton, a high-level recruitment specialist, thought he would retire in 2012. He envisioned traveling, volunteering, maybe working part-time just for fun.
But those retirement dreams have been dashed. Since the economic downturn, his pricey Chicago town house has lost nearly a fifth of its value. He said his investments, though slowly recovering, at one point had been gouged by 45 percent.
Still, Thornton, 59, counts himself among the lucky ones. He's seen too many friends lose their jobs and their health care, and exhaust their savings.
"Every morning I wake up and I fear I might be next, and it's unsettling," he said. "At the beginning of your career, you think there's a start date and an end date. And now for a lot of people in my generation, there's no end date in sight."
Americans of every generation are readjusting their expectations in the wake of a devastating recession. And none more so than the nation's baby boomers, who are reaching the traditional retirement age and finding it means only more uncertainty and more work.
Many are scared, but others are angry. They played by the rules, had successful careers, cared for their families and sacrificed for retirement. Then the recession ate away at their investments and home value, and in some cases swallowed up their jobs. Now comes an election in which Medicare, Social Security and other entitlement programs are on the table, as well as basic questions of whether government should scale back its role in providing a safety net for its citizens.
As baby boomers scramble to recoup their losses, perhaps what has eroded most is their confidence and faith in the American dream. And many aren't sure Washington has the ability or will to restore either - despite the many campaign promises aimed at this huge group of voters.
Steven Sass, associate director of the Center for Retirement Research at Boston College, said the job picture for older workers has undergone a major transition, and politicians, employers and employees have not yet adjusted.
"What has happened is really shocking," said Sass. "In 1983, once you got to age 50, about 68 percent of all full-time workers stayed in the same job until retirement. You didn't leave unless you were fired."
But in recent years, only half of workers have retired from the same company that employed them when they were 50.
"You have people who planned and scraped and saved and denied themselves and sacrificed for the future, and it all blew up in their face," said Isaiah Woods, 66, who hasn't worked full-time for an employer since he was laid off from a Franklin Park, Ill., security firm in April 2010.
Experts said baby boomers had hoped to take their parents' retirement model and tweak it upward. But what they're finding is something broken altogether.
"It's infuriating," said Barbara Susin, a financial adviser who has her own Chicago-based financial firm. At 72, she said she continues to work because she wants to and because she has to.
"Retirement is dead unless you have a couple of million dollars in your retirement savings account," Susin said. "When you have no guarantees and your retirement is based on the market, you're in this little boat being buoyed up and down, and you're scared as hell you're going to drown."
Susin said that her generation was taught that the retirement model was a three-legged stool, made up of personal savings, an employer-based retirement plan and Social Security.
"Two of those legs have already been whacked from under us, and if Social Security becomes market-based, there goes the third leg," said Susin. "The good news is that doctors can help you live longer, but our retirement system wasn't built for longevity.
Financial analysts recommend that older workers plan for 20 years in retirement and have about a year's salary for each year out of the workforce. But that's becoming more difficult to manage.
Sass, the Boston College retirement expert, said that although the 6.2 percent unemployment rate for workers 55 and older is less than the overall 8.3 percent rate, a sound economy is critically important for older workers.
"Younger workers have time to make up their losses," he said. "But for older workers, this economy can cook their finances for decades to come and it affects how they feel about their future prospects."
To add more bad news, a report out last week from Sentier Research, an Annapolis, Md.-based firm, showed that Americans approaching retirement experienced a sizeable decline in household income between June 2009 and last month. For U.S. households with workers age 55 to 64, the median annual income decreased by 9.7 percent, from $61,716 to $55,748. That was the largest decline for any age group studied. Incomes for workers age 65 to 74, however, showed an increase of 6.5 percent, from $39,548 to $42,113.
In March, the Employee Benefit Research Institute asked workers how confident they were that they would have enough money to live comfortably in retirement. Only 14 percent said they were very confident, an amount that has been stagnant the past two years and is well below the 27 percent who answered that way in 2007.
The Center for Retirement Research found that while half of American households are retirement-ready at age 65, more than 85 percent would be prepared by age 70.
For many people that's only possible if they have a job. And unemployment for workers age 55 and older continues to increase at a rate faster than that for any other group.
According to July statistics from the U.S. Department of Labor, job seekers age 55 and older were unemployed on average 51.4 weeks, which is about 17 weeks longer than for their younger counterparts.
In December 2007, only 22.9 percent of older job seekers were out of work for more than 27 weeks. Last month, that figure was 50 percent.
The Center predicts that when unemployed older workers do find work, they will see a decrease of 10 to 17 percent in their earnings and 26 to 34 percent in their assets through 2018. They will also be up to 10 percent more likely to be laid off again.
Sara Rix, a policy analyst with the Washington D.C.-based AARP Public Policy Institute, said even before the recession, many baby boomers had planned to stay active and remain engaged in the workforce through volunteering or consulting.
"Now, I say if you want to work in retirement, then don't retire," said Rix. "If you become unemployed and you're over 55, the chances are pretty good you're not going to find something with a good salary and benefits right now."
She said more workers are recognizing that maybe remaining a year or two longer in the labor force has advantages that are more important today than before the recession.
"For each additional year you work, you replace an earlier year of lower earnings (in terms of the calculations for your Social Security benefit)," Rix said. "That may not have been so important when your house was escalating in value or you were sure your mutual fund wasn't going to fluctuate in such extremes."
Richard Johnson, director of the program on retirement policy at the Urban Institute in Washington, D.C., said workers 62 and older have been re-entering the workforce at a steady pace since the mid-1990s. But in 2009, just when the bottom was falling out of the economy, older workers were seeking jobs at unprecedented rates. By 2011, however, those rates began to decline for workers age 62 to 64.
"It's complicated because jobs were tough to come by," said Johnson. "A lot of (older workers) who left careers were unable to find new jobs. They were giving up and retiring early. That participation rates peaked in 2009 didn't mean people could afford to retire. They probably didn't have a choice."
He said they also didn't have some of the retirement safety nets of prior generations.
"Pension plans aren't nearly as common as they once were 30 years ago," said Johnson. Older workers are "depending more on their savings, but they have rising health care costs and other expenses."
He said employers used to offer former workers health insurance that would tide them over until they qualified for Medicare. But that is much less common.
"That means retirement is not as secure as it used to be," said Johnson. "That's why people are working longer."
Rix said some older workers are seeking re-training opportunities, or starting their own businesses.
Beril Basman, 59, a former vice president for strategic management who was laid off in 2009, now runs her own Chicago-based consulting business.
"Employers are much more careful about spending money by hiring people from the outside to do consulting," said Basman, who worked for a Chicago association. "I started [consulting in 2009]. My colleagues who do similar work, said when you quote, what you're often getting are fees that are [the equivalent to those from] 10 years ago."
Woods has a home-based business marketing energy services. He's exhausted his savings and has been relying on income from a part-time job, Social Security benefits and unemployment compensation, which ends in December.
"All of my needs are met, but the pleasures in life, the extras, the eating out, the vacations and trips have all been cut back," said Woods. "I'm driving a 10-year-old car. But these are lean times, and I don't believe they will last forever."