ATLANTA — 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.
Over 55? Retirement iffy
A study by the Employee Benefit Research Institute determined that 1 in 3 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 layoffs, flat-lined 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 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.
Plans go sideways
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 more optimistic view of Americans’ retirement readiness, and working to 70 is the key.
The NRRI determined that 85 percent of households would be ready to retire if they worked until age 70.
‘The big wild card’
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 may not be “appropriate” for people who’ve worked in physically demanding jobs, or for those who don’t have a job.
Webb also called paying for health care “the big wild card,” as its costs are so difficult to project.