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Baby boomers caught in squeeze play

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There’s an old curse that goes, “May you live in interesting times.” Baby boomers, according to a report from consulting firm Mercer, may be living in the most interesting times of all. 

Boomers, that generation born between 1946 and 1964, are basically the subjects of a massive social experiment. Changes in the workplace, in employee benefits — everything from health care to retirement — and personal obligations, such as caring for dependent elders while trying to put children or grandchildren through college amid skyrocketing tuition costs, have given boomers another name: the Sandwich Generation. 

Stuck financially between a rock and a hard place, many fear the approach of retirement. Either they lack the money to leave the workplace or know that, if they leave, the money will run out and they’ll be back. 

When boomers entered the workplace, defined benefit plans were still pretty much de rigueur. Mercer cited research from the Employee Benefit Research Institute showing that in 1979, 28 percent of private-sector workers had a DB plan and 7 percent had only a defined contribution plan. By 2011, 31 percent of those in the private sector had only a DC plan, while a mere 3 percent had a DB plan. 

That’s been a tough adjustment, leaving employees to figure out how to rethink their retirement strategy, something they haven’t been very good at. 

Nor have their expectations made the adjustment from DB to DC. According to EBRI’s 2014 Retirement Confidence Survey, 24 percent of workers age 55 and over have saved less than $1,000 for retirement. And if that’s not depressing enough, a third of that age group still think they can retire comfortably on less than $250,000 in savings. 

With the average 401(k) balance in 2011 only a little more than $58,991, according to EBRI, it’s plain to see that something’s got to give. Many boomers have saved so little that they find themselves sandwiched between two unattractive options: put off retirement or retire for a while and go back to work when the money runs out — a challenge in itself, considering today’s job market. 

The Sandwich Generation faces another stressor in addition to the retirement dilemma. Those who serve as caregivers for elderly relatives have a higher rate of missed days at work, as well as causing an 8 percent increase in health care costs in the workplace compared with employees who are not caregivers. 

And according to a study from the National Alliance for Caregiving, they are also significantly more likely to report depression, diabetes, hypertension, or pulmonary disease. 

Given all of these challenges, Mercer says, boomers will no doubt continue to work, at least part-time or even full time after a short break from work.

Also, boomers can be expected to rely at least in part on Social Security to help them make ends meet in their semi-retired state.

“For those who choose to retire, many are going to realize five to seven years into retirement that they don’t have enough money to sustain themselves, and they’ll be back in the workforce,” said Orlando Ashford, president of the Talent business at Mercer. 

“The implications for employers are quite fascinating. How are you going to help retirees re-enter a changing workforce? How are you going to manage people in their second or third career, while engaging people who are in their first career at the same time?”

Shams Talib, a senior partner and leader of Mercer’s Retirement business in North America, said the issue is already “starting to have some interesting consequences on the broader workforce.” 

“If senior employees can’t afford to retire, it creates increasing frustration in the workforce, resulting in a lack of focus and lost productivity among younger workers who feel their advancement opportunities are limited,” Talib said. 

In short, more than interesting times for boomers and the generations behind them.


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