More Americans Putting Off Retirement

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put off retirementU.S. workers have been working longer and retiring later by choice since the mid-1990s, but the recession is forcing people to stay on the job longer, according to a new report by The Conference Board. Americans may be living more active and healthier lives these days, but the economy has made their retirement funds weak and frail, so they have no choice but to put off retirement.

"Retirement rates declined significantly during and after the great recession," says Gad Levanon, Associate Director of Macroeconomic Research at The Conference Board, and author of the report. "However, we see that delayed retirement has been more prevalent for some occupations and industries."

In some instances, putting off retirement can actually be a good thing. For example, delayed retirement provides relief for several more years in industries that will suffer significant "brain drain" from all those baby boomers leaving. On the other hand, for companies that would like to reduce headcount, slash labor costs, hire new workers or promote younger workers, delayed retirement could be viewed as a negative development.

The report found several trends unique to the latest recession:

  • The health industry experienced the largest decline in retirement rates. From 2009 to 2010, only 1.55 percent of full-time workers aged 55 to 64 retired, compared with almost 4 percent from 2004 to 2007.
  • The construction industry also experienced a large decline in retirement rates. This is likely the result of a long slump in the industry, which resulted in many laid-off workers trying to stay in the labor force to make up for lost income.
  • There was essentially no retirement delay among government workers. That is expected, since these workers are more likely to receive defined benefits, making them more insulated from the decline in financial asset values in their pensions.
  • Mature workers in high-paying occupations were much more likely to put off retirement than workers in low-paying ones. Those in higher paying jobs tend to have higher financial expectations for their retirement years. Also, high-paying occupations tend to have limited physical requirements, making it easier to continue working. Among lower-paid workers, there is often an increased physical demand, and unemployment rates tend to be much higher. As a result, even if those workers wanted to continue working, finding replacement jobs is often extremely difficult, forcing them to retire.
  • Delayed retirement has affected the demographic distribution within the U.S. Part of the decline in net migration to states like Florida and Arizona likely is due to the trend of delayed retirement. Fewer individuals are leaving the labor force and moving to retirement destinations.
  • Those who suffered from a significant decline in home or financial asset values, lost a job or experienced a compensation cut during the recession were much more likely to delay retirement. Workers in states where home prices suffered especially large slumps (such as California, Michigan, Florida and Arizona) were more likely to delay retirement.

"Overall, the macroeconomic implications of delaying retirement are largely positive," says Levanon. "Delayed retirement allows households to consume more today and reduce the probability of a prolonged slowdown in the U.S. economy, and enables households to reach retirement with more financial resources."

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