About two-thirds of American workers now believe they'll have to delay their retirement by at least one year, with 27% expecting to work at least five years longer than planned because of the debilitating economy and stock-market losses, according to a new survey.
The study, released Thursday by Sun Life Financial, shows that 65% of Americans no longer believe they can retire when they had previously expected to, up 11 percentage points from a similar survey done at the end of 2008. The study, which polled 1,451 workers from Aug. 14 to Sept. 14, found a record 28% expect to be working full time past age 67, up from 20% surveyed at the end of 2008.
"The degree of the shift was surprising," says Wes Thompson, president of Sun Life Financial in the U.S. The economic environment was already troubling when the survey was done a year ago, and "we didn't expect the jump to be as significant up to 65%" during the latest poll, he says.
"Clearly the notion of retiring at age 67 or 65 is behind us. People are looking at that through the rearview mirror," says Thompson. Workers have been rattled by the lost equity in their homes, retirement-plan losses and long-term concerns about Social Security. "Those are three key drivers that are affecting people psychologically," he says.
Although the stock market has rallied since March, that doesn't appear to have restored confidence among workers. "It was such a dramatic drop-off in March that even the recovery in the market since then has not fully made up for the losses people have taken in their retirement plans," Thompson says. Also, home values and unemployment have continued to worsen, he notes.
The top reason given for postponing retirement has shifted in the past year. In 2008, the most popular reason cited was "to stay mentally active," which was given by 83% of those surveyed. Today, however, the top reason is "to earn enough money to live well," cited by 84%. That need for ongoing funding could have wide-ranging effects on the workplace. "You're going to see older Americans in the workforce longer, and that has implications for the entry level of the workforce," he says.
The survey found a sharp drop in confidence among working Americans. Only 40% of them said they were "very confident" that they'd have enough money to cover basic living expenses in retirement, while 25% felt confident they'd have enough cash to pursue hobbies and interests, and 28% expressed a high level of confidence that they had done a good job preparing for retirement.
The study showed workers have also become more skeptical about government benefit programs' being there for them in retirement. Approximately 42% said they were "not at all confident" that they would receive Social Security benefits in retirement that would be comparable to the benefits current retirees receive, which is up from 33% a year ago, and 38% were skeptical they'd get Medicare benefits at comparable levels to today's retirees, up from 27% a year earlier.
David Corbin, a chartered financial analyst and president of Corbin & Co. Capital Management, says he isn't surprised by the survey's results. "I'm actually surprised that the numbers aren't higher," he says.
Many people banked on their portfolios to generate annualized returns of 8% to 10% a year, and much of that was wiped out during the stock-market correction of the past two years, says Corbin. Also, many are concerned about cuts to Medicare, Medicaid and Social Security benefits and the solvency of financial institutions such as banks, insurance companies and brokerage firms. "All of that thrown into a pot gives a tremendous amount of uncertainty to older people," he says.
John Evans, director of wealth management at Truepoint Capital LLC, a wealth-advisory firm in Cincinnati, Ohio, says he's seen a 50% increase during the past six months in the number of clients nervously asking if they'll have enough cash for retirement and if they need to cut back spending or change their investment strategy.
However, he believes the survey's results reflect emotional responses rather than reality. "People are frozen with fear this unbelievable emotional roller coaster has caused people to make decisions to continue to work even if they didn't need to," says Evans. "There's a belief that because the market has dropped and the economy appears to be terrible that they do not have enough to make ends meet ... But oftentimes, if they put pen to paper and examine the financial implications of the market pullback, they will find that they're O.K."
Evans says those affected most are people who have been spending lavishly during their work years and won't be able to maintain the luxury lifestyle in retirement. "Many of the people we're consulting with could continue with their retirement plans with a slightly lower lifestyle," he says.