Workers’ expectations about working longer before retirement have changed substantially during the past 20 years, based on surveys by my firm.
In general, many workers have not accumulated enough for a financially secure retirement, and so they feel they simply must work longer to maintain the lifestyle they want throughout their retirement.
This change has a key implication for retirement preparation strategies that advisors should recommend.
First, let’s look at what is happening in more detail and then provide an idea for how financial advisors should adjust the advice they provide to clients.
In 1991, only 2% of workers expected to retire between the ages of 66 and 69, and only 9% expected to retire after age 70 or never retire at all, according to joint research by my firm, the Employee Benefit Research Institute. By comparison, 19% of the surveyed workers that year planned to retire before age 60.
Since 1991, savings rates have gone down (until recently) and debt levels have gone up. But workers were not blind to the inadequacy of their accumulations for retirement. They just did not want to reduce their lifestyles as much as they needed to in order to fund retirement. So, many started to plan to work longer.
In the year 2000 survey, for instance, 23% of workers said they planned to retire after age 65 or never. In 2005, that percentage rose to 30%. In early 2010, 42% said they will retire after age 65 or never.
Some might think that the main cause of this trend is Social Security raising the age of entitlement for full benefits from the original age of 65 to (for those born in 1960 or later) age 67. But that is clearly not the case–because the big increase is in the proportion of those planning to work until 70 or beyond.
The characteristics of the people who are planning to retire at age 70 and after are interesting. Their income and financial asset levels are approximately the same as those who plan on retiring at a younger age, and their health is about the same.
But those who are planning to work to, or beyond, age 70 are less likely to have a defined benefit plan and/or money in an employer-sponsored retirement plan.