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.”