By Herman Wang
As the average age of retiring Americans edges upward, baby boomers looking to keep or find employment as they get older may be in for a challenge, several recent studies suggest.
A survey of employers conducted by Boston College's Center for Retirement Research found one in four baby boomers won't retire at age 65 because of an insufficient retirement nest egg.
But more worrisome, said Steven A. Sass, a co-author of the study, is that companies appear ill-prepared to accommodate older workers.
"These attitudes might change going forward, but this is not something a lot of employers are excited by," he said. "That's a real issue."
That disconnect is created by the move from defined benefit pensions to self-directed retirement plans, such as 401(k)s, he said.
Instead of having a pension plan with a set amount deducted from each paycheck and a maximum benefit at a certain age, employees now determine for themselves how much to put away toward retirement and which investment vehicles to choose.
"Up until very recently ... everybody knew when people would retire because you had incentives built in," Mr. Sass said. "All those incentives are really gone when you move to a 401(k) world. An employer now doesn't know how much Joe over there has in his 401(k), or if that's all he has and if it's enough. It becomes difficult to plan succession."
Robert Brokamp, editor of the Rule Your Retirement newsletter for the Motley Fool, a financial advice Web site, said retirement ages are trending upward because of longer life expectancies, which weren't taken into account when the first pensions were created.
He cited a study by Wharton School of Business professor Jeremy Siegel that estimates retirement ages will move beyond 70 by 2030.
"Back when the first pension was created in 1889, if you reached age 50, you were likely to make it to 72, and you worked until 70," he said. "You essentially worked for 50 years to support two years of retirement. Nowadays, ... you begin work at 22, retire at 62 and live to 82. You're now working 40 years to support 20 years of retirement. It's just unsustainable."
But if there's a silver lining to this news, it's that putting off retirement for a just few years can dramatically boost an individual's nest egg.
Mr. Sass said if an employee can delay claiming Social Security benefits and tapping into a 401(k) for four years, his retirement income goes up by a third. Hold off on retirement for eight years and retirement income goes up 75 percent.
"Working longer is a great way to enhance retirement security," he said. "So it's bad news in that people are going to have to work longer, but better they do that now than be hard up when they're 85."
Working can be a good social outlet for boomers, Mr. Brokamp added.
"When you tell people this stuff, they say, 'Oh, I've got to work forever,' and it can be depressing. But the flip side is, a lot of people find out retirement isn't that fun," he said. "They travel for a bit, do some projects, and then they get a little bored."
Jim Place, a local financial adviser with Evergreen Management, said he tells his clients to prepare early for retirement by putting 10 percent of every paycheck toward retirement, something many people fail to do until they're age 55.
"They're not allowing the time value of money to work for them," he said.
His biggest advice to those nearing retirement age: "Save 'til it hurts, and have your house mortgage paid off when you retire."
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