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Dreams deferred: Boomers delaying retirement plans

Two years ago, Veldon Sorensen was getting ready to move to Fresno, California. The 62-year-old had no plans to retire anytime soon, having moved seven times during his career — including stints in Canada and Germany — as a researcher for Bayer CropScience. But when he looked at the appraisal on his Salt Lake City home and the fact that the Fresno housing market was still on the decline, he couldn’t see how the move made financial sense. So he took a severance package and an early retirement, uncertain of what the future would hold.

“It was a little bit scary,” Sorensen said. “We didn’t know what we were going to do when my severance ran out.”

The Sorensens are not alone among those in the Baby Boomer generation whose retirement plans were turned upside down by the recession and collapse of the housing market. Many Americans are finding that economic realities are making it impossible for them to contemplate retirement on the timeline they had hoped. From the impact of the recession on savings to a fear of rising health care costs, a number of factors are forcing older Americans to reconsider their plans to leave the workforce.

“A number of people are finding they just have not saved enough,” said Sharla Jessop, a certified financial planner at Smedley Financial Services in Salt Lake City. “We see them at age 65 thinking that, but we also see people in their late 50s and early 60s, and they have this desire to retire. And they’re not going to be able to. They’re not going to have the funds.”

The number of those delaying retirement is only increasing. A report released earlier this year from The Conference Board, a nonprofit group that researches consumer economic trends, found that among workers between the ages of 45 and 60, the number of those who said they were going to delay retirement jumped dramatically from 42 percent in 2010 to 62 percent in 2012.

In fact, about 18.5 percent of Americans over the age of 65 were working last year, according to the Bureau of Labor Statistics, the highest rate in history. And while the expected retirement age keeps rising, according to a recent Gallup poll, Americans are working longer than ever before: an estimated 7 percent of Americans 75 or older still have jobs. For a generation of workers, retirement often still looks like a distant dream.

Woefully underprepared

As retirement savings have moved from pension plans with defined payouts to individual contributions to those same accounts, Americans have been failing to save enough over the course of their lifetimes for a comfortable retirement, according to a number of studies.

One study conducted this year by Deloitte, a large financial services firm, found that a majority of Americans — 58 percent — do not have a formal retirement savings and income plan in place. Even those who have saved often haven't accumulated enough.

The Employee Benefit Research Institute’s yearly Retirement Confidence Survey found that the percentage of workers confident about having enough money for a comfortable retirement is “essentially unchanged” from the record lows observed in 2011, with 28 percent of workers "not at all confident" they have saved enough and 21 percent saying they are "not too confident."

The same survey found one of the reasons people aren’t saving is that they’re simply trying to survive financially. When asked what the most pressing financial issue facing Americans today is, a much larger chunk identified job uncertainty and making ends meet as more important than saving or planning for retirement.

Those who are unable to save much are often in a dramatically worse situation than their counterparts who have savings.

The Economic Policy Institute, a progressive economic think tank, recently found that nearly half of households have no savings in retirement accounts at all, and for the half that do, savings are very unevenly distributed — a household in the 90th percentile of the retirement savings distribution has nearly 100 times more retirement savings than a household in the 50th percentile, who have almost nothing saved.

Steven A. Sass, program director for the Center for Retirement Research at Boston College, said another problem is that even as workers have been consuming more and saving less, they expect to have that same standard of living in retirement.

"Very often when you get into your 50s — when your mortgage is taking less of your income and you've stopped paying your children's tuition — you suddenly feel rich," Sass said. "Then you start creating a standard of living that is difficult to sustain in retirement. But if you had saved that money, you could have obtained a lifestyle that is sustainable. Especially if you're in your 50s and looking out to the future, you don’t want to live high and then crash and burn."

A jumble of causes

Despite a brightening economic outlook and recovery in the stock market, many baby boomers are still looking to delay retirement for a variety of reasons. Some are underlying fundamental issues that exist regardless of the recession.

One is simply that people are living longer, so they need more to live on. According to the Social Security Administration, in 1940, a 65-year-old could expect to live until about age 79. Today, however, that same 65-year-old could live until past 85.

Health care costs have also increased. In the Deloitte study, one-third of those who said they were within five years of retirement reported that no matter how well they prepare, they are concerned that health care and long-term care expenses could overwhelm their retirement savings and income goals.

Jessop said others have delayed retirement because of the recession's psychological and emotional impact. When the market tanked, 401(k) values went down as well. Scared of losing more from these funds, many pulled their money from the stock market and put it in more conservative investments. But this also meant when the market rebounded, they didn’t see a jump in their assets.

These investors, as Jessop put it, “participated in the loss but not the gain” of the stock market's volatility. Now they are still reeling from the emotional impacts of that loss, Jessop said, so they are less likely to trust their retirement money to get them through any market swings that might happen during their retirement years.

The recession also led to layoffs and decreased income, forcing people to draw from retirement savings just to get by, leaving less for their retirement years.

“The cumulative effect of drawing down assets in hard times — including the loss of future gains during the recovery — helps explain the current plight of older workers,” said Ben Cheng, co-author of The Conference Board report, in a press release. “Even as economic conditions improve, many are still relying on assets to get by. And even those who’ve made it through the worst find themselves needing to work past retirement age to rebuild savings.”

While economics appear to be a huge driving force behind when and why seniors retire, there’s also another, less depressing cause of delayed retirement, which is that older workers often seem to simply enjoy their jobs.

Soon after his retirement, Sorensen received a call from Bayer to do consulting work advising on the issues involving bee deaths. Sorensen is passionate about bees — he spends his days when he’s not working keeping bees in his and his neighbor’s yard. And because of his independent consulting work for Bayer and other organizations, Sorensen has been able to delay taking Social Security.

Sorensen feels lucky to pursue his work with bees while his wife, Diane, continues to volunteer with the Bradley Center for Grieving Children and Families. “We’re very fortunate,” Sorensen said. “We have the flexibility to work with our church and spend time with our grandchildren. It’s nice that my hobby could turn into a job.”

A 2012 survey by the American Psychological Association found that working Americans 55 and older were the most likely to cite enjoying their work as the most important reason they stay at their job. In fact, in that age group, more people cited work enjoyment than pay as the reason for staying with their current employers.

And sometimes a combination of these factors comes into play. Utahn Reid Saxey, 75, is still working as assistant director of the Brigham Young University Paint Shop due to a large unexpected tax bill on his side business selling homemade clocks.

But even when he retires, he said, he'll still work on his clock business full time. "I’ll never take it easy," Saxey said. "My ambition is to get out and sell more clocks."

Getting on track

But for those who want to retire someday, preferably sooner rather than later, figuring out how to navigate the world of 401(k)s and IRAs can seem daunting. Experts say building up savings as early as possible is essential in having enough money to retire the way you want.

Jessop said planning for retirement is “like running a marathon versus running a sprint. You have to prepare all along like you’re going to run a marathon. You can’t just get up to the start line and go.”

Experts also say getting sound financial advice is important. A 2010 study from the Center for Retirement Research at Boston College, for which Sass was a co-author, found when people received good financial advice, it substantially changed their attitudes toward their retirement plans.

A full 60 percent of study participants reconsidered their plans, with 24 percent saying they would increase their retirement age, 20 percent saying they would increase their savings, and 16 percent saying they would do both. The center has developed a website, Squared Away, where people can calculate the amount they need to save for retirement, figure out how to allocate assets and find reliable financial advisors.

Sass said finding good financial advice is a valuable and important step toward retirement preparation.

"It's more important to get somebody to figure out how much you should save and spend and how long to work," he said. "Not somebody who’s a stock picker. Find someone who can figure out how much you should save and spend, when to retire, and who will help you stay on that plan consistently."