January 26, 2006

Many Retired Find Themselves Going Back to Work

Healthcare too costly for seniors to afford unlimited leisure time--Retirement Plan Advisor, January 2006

Who doesn't have great dreams for their retirement, grandiose plans for what they're going to do with all that free time?

Well, folks, you might as well put those dreams on hold, because most of us are apparently only going one place after we retire: Right back to work.

According to a recent survey released by Putnam Investments entitled "The Working Retired," that much-anticipated phase of life that is retirement is increasingly proving to be nothing more than a very brief hiatus for much of America's working population. The survey found that seven million previously retired Americans returned to work for pay after a non-working hiatus that averaged only 1.5 years.

The number of working retired is only going to increase in the coming years, says David Tyrie, director of retirement services at Putnam. The survey states that 67% of the current workforce aged 40 or older plans to resume working after they retire, and in most cases, it is not because people want to, but because they feel they have to. "There are those who want to go back to work, and then there are those who have to," Tyrie says, and this should serve as a wake-up call to all. "If you have the money you need for your retirement, you are all set, and you are happy. If not--well, that's why people return to work."

Indeed, the fear of not having enough cash to fund the high costs of retirement (healthcare in particular) is pushing many people to rejoin the workforce, Tyrie says. Granted, many of us are still able-bodied and mentally sharp at the age of 65, and therefore perfectly equipped to take on full-time work, and many of us probably even want to return to work. "You're going to see more and more people returning to work after they retire because they haven't saved enough," he continues.

According to Tyrie, the main reason why people who return to work after they retire have not saved enough is because they do not have an adequate retirement plan in place. Certainly, the group surveyed by Putnam is in a advantageous situation vis-?? 1/2 -vis a large percentage of the American workforce, earning on average $87,000, per annum, a wage that is 60% higher than that of traditional non-working retirees (in their post-retirement jobs, though, these people make less than they did before). The working retired are, in general, also about twice as likely to have a college degree, but surprisingly, over half (60%) still carry a mortgage, a large percentage for people in their sixties and even seventies.

The working retired who participated in the survey also have, on average, investable assets of about $400,000, but 70% of them wish they'd started saving more, and sooner. The only way this is going to change, Tyrie says, is if people get a retirement plan in place early on in their working lives.

"People need to have a greater consciousness of the realities of retirement," he says. "They need to have correct expectations and goals, and a monitoring system for their plans."

While the onus has largely fallen upon individuals themselves to hold the reins when it comes to their retirement income, corporations also have their share to do, Tyrie says. Implementing features such as auto-enrollment in 401(k) plans--something that is going to become more and more prevalent going forward--can help people a great deal, he says, as can using the services of financial advisors.

In fact, this survey has really shone a spotlight on financial advisors, according to Tyrie. "They can add a lot of value to saving for retirement by helping people with their plans," he says.

The results of the survey have also highlighted the increased need for companies like Putnam to work closely with financial advisors to meet the needs of clients, Tyrie says, by tailoring investment vehicles for them and offering other kinds of help and solutions. Putnam has started giving participants in their 401(k) plans a "Gap Analysis," Tyrie says, a statement that shows the status of a person's 401(k) with respect to their goals and that offers ways in which the "gap" can be filled.

With a more proactive approach from all parties--individuals, corporate management, financial advisors and investment firms--the goal of making sure that more people return to work because they want to rather than because they have to can become a reality, Tyrie says. The good news is that the retirement picture is getting better, he says, and with the demonstrated backing of the U.S. government (Congress is doing a lot to ensure that the foundations for correct retirement planning are in place), things can only improve further.

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