Is working the new retirement?

Just in case baby boomers weren’t already re-defining retirement, along comes a major financial crisis to disrupt even the best laid plans.

As recently as two years ago, the buzz was about how boomers are redefining retirement by staying active in the workforce. They are continuing their careers on a part-time basis, starting new businesses and even trying out a second career. For many boomers, “retirement” is simply an opportunity to try something new, to stay engaged and take on new challenges.

Now employment is becoming more of a need than a want for some boomers, according to recent media reports. With shrinking nest eggs and increasing uncertainty, many baby boomers are buying time by hanging on to their full-time positions a little longer. According to a January 2009 Working Longer Omnibus survey from the BMO Retirement Institute, over half of boomers still in the workforce plan to put retirement on hold. And what about retirees? Forty-five percent report they plan to return to work within the year.

BMO isn’t the only one to note this development. A September 2009 report from the Pew Research Center reports that while older workers have been staying in the workforce longer for the past couple of decades, this trend has intensified due to the recession. In the U.S., 4 in 10 working adults over the age of 62 say they have postponed retirement plans due to the economic crisis. Over 60 per cent of workers aged 50 to 61 report they have had to push back their “retire by” dates. There’s also a gap between the sexes: More women than men say they plan to work longer.

On the other end of the scale, many young workers are staying out of the workforce. The report also found that more people between the ages of 18 and 24 are in school, up nearly 10 per cent from 2000. These two trends combined mean the workforce is now “greyer” than ever before.

However, the economy is only part of the story. According to the Pew Research Center Report and an April 2009 BMO report, there are other reasons boomers don’t retire:

Feeling useful. According to the Pew Research Center, “feeling useful/productive” and “giving myself something to do” are among the top reasons why people over 65 continue to work. Being with other people and contributing to society were also common replies.

Supporting themselves and their family. Up to age 64, the top reasons for working are to live independently and/or support a family (78 per cent and 88 per cent respectively). After age 65, 59 per cent of workers cite “live independently” as a motivating factor, while 53 per cent are still concerned about supporting a family.

Lack of confidence: If the last two years has taught us anything it’s how quickly the market can turn. After watching their investments shrink and coping with months of uncertainty, many people are wondering “how much is enough?” and questioning their plans (if they had any to begin with). In a 2006 BMO survey, 70 per cent of people didn’t know if they were on track with their retirement goals or didn’t feel like they were making their targets — and that was before the market meltdown. Insufficient knowledge and a lack of planning are partly to blame for the uncertainty many boomers currently feel.

Longevity: The dark cloud behind the silver lining of longer, healthier lives is that people aren’t sure just how long their savings will last. The average lifespan for Canadians is now over 80 years of age, but this number continues to climb thanks in part to better treatment, management and prevention of disease and disability. With many people living into their 90s and possibly beyond — not to mention inflation, taxes and healthcare costs — it’s quite possible to outlive one’s savings. Not only does more years in the workforce mean more income, it also means fewer years of depleting precious reserves.

Not enough savings: It’s easy to blame over-spending on luxuries and ready access to credit, but the issue is more complex. Some simply didn’t have money left over to sock away into RRSPs or savings, while others cite health and job issues as interfering with their plans. Many boomers wish they had started saving sooner, and put more aside.

In addition, the financial pressures of being the “sandwich generation” eat away at the money available for savings and investments. Not only are boomers called on to help out their children and even their grandchildren, but they’re also supporting their parents.

Higher earning potential: Boomers are at the top of their game, so why stop now? They’re earning more than they did in their younger years, and they’re building pension assets while their salary is at its peak. A few more years of full-time work can be even more beneficial than a longer period of part time employment. In other words, once they retire working becomes a pastime, not a requirement.

Concerns about healthcare and pension: Will there be enough money in the company pension and health care plan to cover all those years of retirement? Many people are starting to have their doubts about how robust the plans are, and fewer companies are offering these perks at all as part of their compensation packages. The bottom line: The onus is on employees to look after these costs themselves in the future. Staying in the workforce longer means retaining benefits, and more money to set aside for future healthcare costs.

For more information, read the BMO report here (pdf file) and the Pew Research Center report here.

Most boomers not in “the zone”

So how bad is it? Most boomers can’t afford to retire anytime soon. That’s the startling message from financial planner and author Jim Otar. In his new book, Unveiling the Retirement Myth, Otar argues that most boomers are in bad shape for retirement — thanks to a lack of planning and savings. Some boomers are in what he calls the “green zone” where there’s enough savings and investments to retire and still maintain their current lifestyle. However, there are too many boomers in the “red zone” where their current retirement plan isn’t going to be enough. In the middle — the “grey zone” — are boomers who could go either way, depending on what decisions they make now.

What’s throwing a wrench into the plans? Emergencies and unforeseen circumstances can quickly dry up financial resources. Otar, a former engineer, favours planning for the worst-case scenario, not the “average”. In order to stay out of dangerous territory, Otar argues that boomers should plan on keeping their jobs a while longer — or find a new career that will carry them for a few more years.

It’s not surprising his book has been garnering a lot of attention thanks to its startling premise. After being featured in the Financial Post, demand for free online previews of the book overwhelmed Otar’s website. (He now charges $3.99 for a read-only version, and $19.99 for an electronic version that can be printed.)

So what’s the take home message? People are worried — but there is something they can do. Experts like Otar and the folks at BMO agree that preparation and planning are key. Essentially, if you don’t have a solid plan, get one. If you do have a plan, review it to make sure you’re still on track.

(For more information on Otar’s book, visit his website at

Additional sources: Calgary Herald, National Post, USA Today

Photo © Rob Belknap


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