Shaky Economy Puts Retirement Plans on Hold

Sharon Saunders put her suburban Chicago home on the market and promptly gave notice that she was retiring. She and her husband bought property near a lake in sunny South Carolina, she told her boss, and she needed to focus on packing up the family home.

That was two years ago. Today her home is still up for sale. Fortunately, says Saunders, 68, her employer persuaded her to stay on the job—reduced to three days a week until her home sold.

Sharon’s husband, Bill, 72, is also still working as a full-time salesman.

“We had no idea it would be so difficult to sell our home,” she told the AARP Bulletin Today. “I’d sure like to be in a warmer climate next winter. I’m worried that if this house doesn’t sell, we won’t be able to afford to build the house we like in South Carolina.”

As tumbling property and stock values erode Americans’ nest eggs, an increasing number of older workers are delaying retirement or re-evaluating plans to retire. According to an AARP survey in May, nearly one in five people ages 55 to 64 and about one in four ages 45 to 54 said they planned to delay retirement due to the economic downturn.

For many, depreciating property values spoiled plans to sell the family home and downsize, a common retirement strategy. Declining home values in particular prompted 31 percent of workers age 45 to 54 to say they were delaying retiring; 18 percent of those age 55 to 64 aid the same.

Others were more troubled by their diminishing investments and fluctuating 401(k) accounts, which replaced the more stable employer-provided pension plans for many over the years.

A third of workers ages 55 to 64 said they postponed plans to retire due to shrinking portfolios, as did 19 percent of people ages 45 to 54, according to the AARP survey. It polled 1,002 people age 45 and up.

An uncertain economy has also spurred some retirees to return to the labor force, fearing they’ll outlive their savings. Nearly one of four adults ages 65 to 74 was in the workforce, and those numbers continue to grow. In 2000, the Bureau of Labor Statistics recorded just 19 percent of workers in that age group.

Karen Smith, a senior research associate with the Urban Institute in Washington, says staying on the job longer is a trend that’s likely to continue in the coming years as employers cut back on retiree health care coverage and traditional pension plans go by the wayside.

“From the workers’ perspective, if they can stay on for another year, it’s much more beneficial, especially for low-income people,” Smith says. “You give up a year of leisure, and you get a year of earnings and savings, and you increase your Social Security benefit.”

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. Although his home is in Alabama, he was willing to transfer to Colorado for work. Now, he says, getting to his job in construction by 7 a.m., Monday through Friday, is just “a fact 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 the high health care costs when I retired,” he adds. “We’re living in a day when not being able to retire is just a fact of life.”

David Certner, legislative policy director with AARP, says it’s no surprise that people are reassessing or putting off plans to retire.

“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. “Thus retirement security rises and falls with the market.

“In times of economic uncertainty, especially with the nervousness over falling home and asset values, many people choose to continue working as the safest—and maybe smartest—option.”

Christian Weller, a senior fellow at the Center for American Progress, a think tank in Washington, says today’s economic outlook is reminiscent of the recession of 2001-2002, when older workers on the verge of retirement had similar qualms. Stocks and retirement portfolios plunged in value at the time. The one glaring contrast: Housing prices surged and people accumulated huge equity over the years.

“Because of the run-up in housing prices, people had thought they could retire earlier than they otherwise would’ve,” Weller says. “They had unrealistic expectations. Most people don’t figure out how much they really need for retirement. It’s only in the last six to 12 months to retirement that they do that planning.”

Geoffrey VanderPal, a certified financial planner in Las Vegas, says some of his clients in their late 50s and early 60s, who’d planned on retiring in the next 12 months, “are now having serious second thoughts.”

“There’s a lot of uncertainty, and with uncertainty comes fear,” he says. “The markets are shaky, real estate is going down in value.” What’s more, he says, many retirees have fewer years to make up the money they’ve lost.