Retirement Prospects Post Great Recession

Friday, March 23, 2012

Lowered 401(k) accounts balances, declining home values, lay-offs, reduced earnings, increased debt levels, all devastated the confidence of many near-retirement age workers following the 2008-2009 financial crash. The natural reaction for many workers is to remain in the labor force and attempt to recoup losses, pay down debt and somehow make-up for their diminished financial status. Postponing retirement age does have the potential value of an increased monthly social security benefit amount. Remaining in the work force does provide an opportunity to re-build 401(k) accounts and pay down debt. Unfortunately, time is both the friend and enemy of those attempting to plan and save for retirement.

The Employee Benefit Research Institute reports that in spite of financial and employment prospects improving, many workers still have a low level of confidence in their ability to retire.  A recent CareerBuilder study found that 22% of workers believe that they will never be able to retire, another 22% are planning to postpone retirement by 5-6 years, and 18% think it will be 7 or more years before they can leave the workforce.  A 2011 Towers Watson Retirement Attitudes Survey, pointed to an increase in the desire by older workers for more security in their retirement health care and savings plans. Over 50% of the employees surveyed reported they would trade take-home pay for more security in their retirement benefits. One positive note from the survey is that workers appear to be more engaged in the retirement planning and are paying closer attention to their retirement needs.  The Mercer “What's Working” survey, which was conducted from Q4 2010 to Q2 2011 found that for US and Canadian employees, an adequate retirement plan ranked as second in value, after base pay. Even outside North America, retirement plans are in the top 5-7 value positions for workers.  A June 21, 2011 report on National Public Radio hosted by Neal Conan related that many older workers want to retire but are financial able to do so. The result is that many younger workers are unable to move up as older workers have postponed retirement. This result also has a dampening affect on entry level jobs as current workers have few opportunities to advance.

While this may seem like a lose-lose game, but consider that organizations are now is a position to use this time to transfer knowledge and skills from long-term older workers to their up and coming younger cohorts. Yes, many older workers may elect to postpone retirement for 5-10 years, however, they will eventual retire. Many of these same workers have been trained and operated technically sophisticated machine tools, this would be an opportunity to implement apprentice programs designed to train younger workers. The ironic issue is that faced with naggingly high unemployment, many organizations continue to struggle to fill vacant positions with skilled workers, as reported by a survey by the ManpowerGroup.