A decade ago, Denise McColister envisioned a comfortable retirement around the time she turned 62.
“At 45, I felt really secure,” the Dallas resident, now 55, recalled. Back then, her husband made good money, and their house was paid for.
Then he became disabled and their house, which they had borrowed against, plummeted in value. Now, instead of padding her financial cushion, she’s working a part-time call center job while hoping for a better position. There’s no retirement in sight.
“I’ll probably be working until I’m called home,” she said.
Many Americans have had to adjust their retirement dreams since the recession and housing bust. For some, like McColister, the question is whether they can ever retire.
A study by the Employee Benefit Research Institute determined that one in three households headed by people now age 55 to 64 won’t be financially prepared to retire even by age 70. Lower income people face the biggest problem.
It’s generally accepted that the effects of career-interrupting layoffs, flatlined pay, declining property values and a turbulent stock market have eroded wealth to the point where many can no longer expect to stop working when they’re 65 - let alone earlier.
The demise of traditional pension plans and spotty participation in 401(k) plans or other savings vehicles also has undercut retirement readiness.
Still, the conventional wisdom - bolstered by other studies - is that retirement should still be feasible at least by age 70, thanks to higher Social Security payouts, the accumulation of more savings, and the shortened post-retirement lifespan. Even that extra time on the job may not be enough when potential long-term care and medical costs are factored in to the equation, as in the EBRI study.
The problem is that working much beyond 65 may not be practical for many. The EBRI’s retirement confidence survey found that nearly half of all retirees who were interviewed said they were forced to retire because of a spouse’s medical condition, their own health, or their employer’s choice. In other words, they couldn’t extend their careers even if they wanted to.
“It would be comforting from a public policy standpoint to assume that merely working to age 70 would be a panacea to the significant challenges of assuring retirement income adequacy, but this may be a particularly risky strategy, especially for the vulnerable group of low-income workers,” said Jack VanDerhei, the study’s author.
The EBRI projections are more pessimistic than those from other groups because they factor in longevity risk, investment risk and the chance of long-term health care costs.
Barbara Wainwright, 66, of Marietta, recognizes the importance of covering health care costs for a senior.
Like McColister, she works a part-time job in the Georgia Department of Labor office in Marietta and is looking for something more. A widowed breast cancer survivor, she looks back now and says, “It was my plan to retire at 65.”
After a career working jobs in fields as diverse as health care, education and security, and after raising four children, she faces having to pay for a mortgage, a car, food and utilities as well as mounting medical bills. Her late husband’s Social Security benefits are not enough.
“I’m working to pay for medication,” she said.
Because of her health, she’s not sure how long she will be able to work, but said, “You may give out, but you don’t have to give up.”
Janie Walker, 65, has no plans to give up her job for a while. Associate state director for community outreach at AARP of Georgia, she expects to work to “more like 71 or 72,” for financial reasons.
“I do feel I will be able to retire, but it will be much later than I would have expected when I was 50,” she said.
Walker’s well-laid financial plans went sideways when a corporate restructuring and the recession led to layoffs.
“When you get laid off in bad economic times it takes a long time to find a job,” she said. “You go through your savings and it takes a long time to recover from that.”
Now, she wants to work long enough to help pay for her grown daughter’s specialized music study and her mortgage.
Working until 70 will allow her to collect the maximum Social Security benefit, which increases annually until then.
That’s one of the key reasons to work that long, according to The National Retirement Risk Index, done by the Center for Retirement Research at Boston College. The NRRI takes a a more optimistic view of Americans’ retirement readiness, and working to 70 is a key reason why. The NRRI determined that 85 percent of households would be ready to retire if they worked until age 70.
By contrast, it said, 51 percent of workers are “at risk” of not having enough money to maintain their living standard if they retire at 65. When health care and long-term care costs are factored in, the number rises to 65 percent.
“The one piece of advice that’s relevant to those with a good job and good health is that work is a powerful antidote to not having saved enough for a comfortable retirement,” said Anthony Webb, one of the authors of the work which is subtitled, “How Much Longer Do We Need to Work?”
Webb acknowledged that working to 70 (or beyond) may not be “appropriate” for people who’ve worked in physically demanding jobs, or for those who don’t have a job or can’t hold on to one. Studies have shown that while older Americans are less likely to lose their jobs, they have a harder time finding a new one when they do.
Webb also called paying for health care “the big wild card,” as its costs are so difficult to project.
Walker, who’s not planning to retire until her 70s, knows about wild cards, and how they can cause a person to put off retirement.
“I have a lot of friends who don’t think they will ever be able to retire,” she said.
That saddens McColister, who’s put the idea of retirement out of her head.
“I’ve seen so many people who worked up to the time when they couldn’t work anymore,” she said. “And they never got to enjoy retirement because their health gave out. So I don’t even think about it.”
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