Retirement on Hold:
How Long Will You Have to Keep Working?

Josie Pirozzoli, 60, and John Heisler, 54, of Winter Haven, Fla. Photo by Joshua Kessler

They’d spent years crunching numbers, planning for their long-awaited retirement. Now the couple say they can’t afford it.

Josie Pirozzoli, 60, and her husband, John Heisler, 54, of Winter Haven, Fla., had planned to pay off their mortgage first, dabble in real estate and cash in some of their 401(k) and IRA funds to travel, pursue hobbies and “just enjoy each other.”

But their income nose-dived along with the economy. Now they may have to sell the waterfront home they’ve settled into for their retirement years if they cannot find jobs soon.

“We were working 24/7 and thought that, finally, we’d have time to travel and do things we never had time to do—antiquing, volunteering, watercolor painting,” Pirozzoli says. “That’s not part of the plan anymore.”

As tumbling property and stock values erode Americans’ nest eggs, an increasing number of workers are delaying retirement or re-evaluating their dreams of the golden years that may, in fact, never come to pass.

An AARP survey in April found that nearly one in five people ages 55 to 64, and about one in four ages 45 to 54, planned to delay retirement because of the economic downturn. Nearly one in three people ages 45 to 54 blamed falling home values for the decision to postpone retirement; 18 percent of those ages 55 to 64 said the same.

Others were more troubled by their declining investments and fluctuating 401(k) accounts. One-third of workers ages 55 to 64 said they postponed plans to retire due to shrinking portfolios, as did 19 percent of those 45 to 54, according to the poll of 1,002 people.

Working longer is a trend that’s likely to continue as employers cut back on retiree health care coverage and traditional pension plans go by the wayside. By 2014, the number of 65-plus workers in the labor pool is projected to grow by 74 percent, according to the Bureau of Labor. Last year, nearly 6 million workers were 65 or older.

Alicia Munnell, director of the Center for Retirement Research at Boston College, says the huge number of foreclosures and more workers borrowing from their 401(k) plans are “eroding the major assets people have as they enter retirement.”

“It’s very hard to make up a lot of that money if you’re in your late 50s or early 60s,” she says. The downturn in the stock and real estate markets is “accelerating what people will be forced to do anyway”—retire later.

Karen Smith has spent years researching retirement issues at the Urban Institute in Washington. She says low-income workers in particular benefit from staying in the workforce for an extra year.

“You give up a year of leisure, and you get a year of earnings and savings, and you increase your Social Security benefit,” she says. “That  adds up to a sizable return.”

Money woes pressed Jerry Wood, 69, to reenter the workforce two years ago after a short-lived retirement from his job as a field engineer. Though his home is in Alabama, he accepted a transfer to Wichita, Kan. Now, he says, getting to his construction job by 7 a.m. five days a week is just part of life in his later years.

“With the downturn in the market and the high cost of drugs, I needed to go back to work to make ends meet,” says Wood, who has diabetes. His wife also has diabetes and related eye complications that require expensive treatment. “We weren’t counting on such high health care costs when I retired,” he says.

Like Wood, many people say health care costs are the biggest obstacle to a secure retirement. In a recent survey by the Employee Benefit Research Institute, 43 percent of workers polled said they aren’t confident they can cover medical expenses as they get older. And only 18 percent said they’re “very confident” they can retire comfortably, down from 27 percent in 2007. That’s the biggest one-year drop since EBRI began tracking worker attitudes toward retirement savings 18 years ago.

David Certner, AARP legislative policy director, says it’s no surprise that people are pessimistic about their retirement security.

“The current stock market volatility has become even more important to many in or nearing retirement who rely on their own pensions, such as 401(k)s, that put investment risk on individuals,” he says. “So retirement security rises and falls with the market.”

Christian Weller, a senior fellow at the Center for American Progress in Washington, says today’s economic outlook is not unlike the recession of 2001-2002, when workers on the verge of retirement had similar qualms. Portfolios plunged in value at the time. But back then there was a silver lining: Housing prices surged and people accumulated huge equity over the years.

Now, he says, “because of the run-up in housing prices, people had thought they could retire earlier than they otherwise would have. In my experience, it’s only in the last six to 12 months to retirement that most people figure out how much they really need.” [See the AARP Retirement Calculator at bulletin.aarp.org/yourmoney/.]

Ed Gjertsen, a certified financial planner in Chicago, says his older clients are reassessing what their assets will be worth in a few years, given the economic conditions.

“When your portfolio is going down, and housing and equity prices are going down, and inflation is creeping in—this adds a dimension of nervousness. It’s hard to tell clients to wait and see what happens. As they’re approaching retirement age, this isn’t what they pictured.”

Lois Hudson, 65, pictured retiring this year from her job as an office administrator in California and moving to Maryland to be near her daughter. But she got caught up in the nation’s mortgage crisis and now owes more on her condo than it’s worth. She can’t sell it and may even face foreclosure.

Of course, not everyone in a shaky financial position is making the decision to defer retirement. After 30 years in the travel business, Patsy Parker of Helena, Ala., felt “worn out.” She wanted to quit work, but her savings had dwindled by one-third, making retirement seem implausible.

Then in May, she announced her plans. “I bit the bullet and resigned,” she said. “I didn’t want to keep putting my life on hold for money.”