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Retirement Planning > Saving for Retirement

News & Products, March 2007

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A new report by the Vanguard Group has found that Americans aged 40 to 69 expect to gradually ease into retirement, with work playing an important role in their early years of retirement.

“Six Paths to Retirement” details a variety of ways Americans approach retirement, including “downshifting” into retirement by reducing their work hours or taking on part-time work or a less stressful job. Nearly two in three respondents aged 55 to 69, the study found, “have downshifted already or plan to do so in the future.”

The Vanguard study found that retirees take six distinct paths to retirement. The “still working” crowd, the largest group of respondents (35%), stopped working fulltime in their 60s, yet, for financial reasons, continued with some type of part-time work or self-employment. The early retirees, which made up about 30% of survey respondents, stopped working in their 50s and never started working again. Vanguard says while these folks retired earlier than usual, this group “fit the conventional view of retirement,” and had adequate financial resources to support an early retirement. About 12% of the respondents were dubbed semi-retirees because while they retired from full-time work in their 50s, they “took on high levels of part-time work or self-employment,” to stay active, enjoy themselves, or to earn discretionary income, the study found.

One-quarter of Americans, the study reports, follow three other paths. There are those who will never retire–10% of respondents–as well as what Vanguard dubs “returnees,” (5%), who retired early but then returned to work for financial and psychological reasons. The third route is the “spouse’s retirement” path (9% of respondents), which Vanguard says “represents individuals who had lower participation in full-time work in their 40s and 50s and pegged their retirement to that of their spouses.”

The Pension Protection Act of 2006 (PPA) includes a number of provisions, based on behavioral economic research, that are designed to overcome worker inertia in saving for retirement, according to a new report by the Employee Benefit Research Institute (EBRI). The report, penned by Jodi DiCenzo, founder of Behavioral Research Associates in Evanston, Illinois, says that research by behavioral economists has shown that, when it comes to retirement planning, people tend to take the path of least resistance, and often make decisions that are contrary to their best interests.

DiCenzo says that by adopting the auto enrollment and default contribution provisions in PPA, “Congress explicitly places a priority on helping employers use the path of least resistance to get more workers to participate in 401(k)-type retirement plans, where one is offered.” Workers may actually benefit, she says, “from having some decisions taken out of their hands.”

In early February, Gary Amelio became president, retirement services for ULLICO Inc., the union-owned, multiline financial services organization based in Washington, DC. Since 2003, Amelio has been executive director of the Federal Retirement Thrift Investment Board, the world’s largest defined contribution plan. According to a statement announcing Amelio’s appointment, the newly created retirement services business unit will lead the expansion of ULLICO’s existing presence in the retirement market as an asset manager of over $4.6 billion of defined benefit plan assets, primarily for Taft-Hartley plans.

“The Labor movement in North America is faced with significant challenges when it comes to the retirement services needs of its members,” said ULLICO President and CEO Mark Singleton, in a statement.