The Changing Nature of Retirement

Transcription

1 Company LOGO Brittne M. Nelson, AARP, Knowledge Management The Changing Nature of Retirement 2008 International Association of Workforce Professionals 95 th International Educational Conference Richmond, VA, June 8-15, 2008

2 Overview Retirement Trends Changing Retirement Preparing for Retirement Factors in in Retirement Satisfaction

3 Retirement Trends What is retirement? Whether or not in paid labor force Whether or not receive income from pension or Social Security How is retirement changing? Why is retirement changing?

4 Working Retirement Working Retirement Individuals in Paid Labor Force and Receiving Retirement Income: % 30% 36% 35% 36% 34% 35% Bridge Employment Phased Retirement 20% 10% 0% 9% 10% 10% 10% 10% Source: Purcell, P. (September 14, 2005) Older Workers: Employment and Retirement Trends. CRS Report for Congress.

5 Older Workers: National Nearly one in three U.S. workers will be 50+ by 2014 Projected Number of Workers Age 50+: Millions Source: U.S. Bureau of Labor Statistics Projections for Civilian Labor Force

6 Older Workers: Virginia In a 2004 survey of VA employers by AARP, three in ten (30%) employers say more than half of all employees are % of VA businesses are small businesses 48% of VA residents work for small businesses Source: Nelson, B. and Cummins, R. (2004). When the Boom Drops. A Survey of Virginia Businesses on Older Workers. Washington, DC. AARP.

7 Trends Changing Retirement People are living longer People are working longer and expect to work longer Pensions are declining Savings are low Debt continues to grow among older Americans Healthcare and long-term care costs are rising

8 Life Expectancies at Age 65 Men: Can expect to live to % will live past 90 Women: Can expect to live past % will live past 90 Source: 2006 OASDI Trustees Report. Washington, DC. U.S. Government Printing Office.

9 Working Longer Age which average worker plans to retire has crept up from 62 in 1996 to 65 in Nearly half (47%) of pre-retirees who expect to work past retirement age, plan to work in a different job. Source:

10 Three in five U.S. adults plan to work after reaching retirement age 51% part-time 12% full-time Top reasons Enjoy working (43%) For the money (19%) Source: and Brown, S.K. (2003). Staying Ahead of the Curve The AARP Working in Retirement Survey. Washington, DC. AARP.

11 Retirement Plans Have Changed From Defined Benefit guaranteed % of preretirement wages based on years worked To Defined Contribution such as (401(k) s), workers make contribution, bear risks, no guaranteed return Shift of the risk, responsibility, and cost

12 Number of Plans PBGC Insures (In Thousands) Small Companies Mid/Large Companies <100 Employees Employees ,000-9,999 Employees ,000+ Employees Source: PBGC s Pension Insurance Data Book Counts include frozen and closed plans.

13 70% 60% 50% 40% 30% 20% 10% 0% Percentage of Civilian Workers With a Defined Benefits Plan by Age 45.5% 38.1% 61.8% 65% 60.7% 55.5% 57.1% 50.6% < Source: AARP Public Policy Institute. (2006). The State of 50+ America 2006.

14 Percentage of Civilian Workers Without a Defined Benefits Plan 60% 46.1% 47.4% 47.8% 51.6% 48.3% 40% 20% 0% Source: AARP Public Policy Institute. (2006). The State of 50+ America 2006.

15 Personal Savings Reported Total Savings and Investments (Excluding Home and Defined Benefits) by Age 60% 40% 20% 53% 42% 26% 12% 8% 12% 12%. 11% 12% 12% 0% <$25,000 $25-49,999 $50-99,999 $ ,999 $250k+ All workers 55+ Source: Employee Benefit Research Institute (April 2006). Issue Brief No Will More of Us Be Working Forever? The 2006 Retirement Confidence Survey.

16 Debt Six in ten Americans households age 55+ have debt $51,791 average total debt $32,000 median debt Age 75+ account for most of the increase in debt Housing debt is a major factor Source: Employee Benefit Research Institute (September 2006 Vol. 27, No. 9). Debt of the Elderly and Near Elderly,

17 Percentage of American Families with Head of Household Age 55+ With Debt by Age, % 74.0% 76.3% 76.2% 76.3% % 54.1% 51.9% 57.0% 58.5% % 28.4% 25.0% 29.0% 40.3% ALL % 54.0% 53.0% 56.0% 60.6% Source: Employee Benefit Research Institute (September 2006 Vol. 27, No. 9). Debt of the Elderly and Near Elderly,

18 Health Care Fewer employers offering retiree coverage Decrease from 22% to 13% among private employers Medicare covers only about half of retiree expenses Retirees could need as much as $295k to cover premiums and out-of-pocket expenses for a 20-year retirement Source: Employee Benefit Research Institute (July 2006). Issue Brief No Savings Needed to Fund Health Insurance and Heath Care Expenses in Retirement.

19 Three Pillars of Retirement Security Social Security Employer- Sponsored Retirement Plans Personal Savings

20 Bottom Line: Americans will need to take charge of their own financial security in retirement

21 Retirement Preparation What is your vision of a successful retirement? Structure Community Purpose Share your vision Source: Five Questions for John R. Trauth: Planning for Successful Retirement. (April 2007). ASA Connection.

22 Retirement Factors Lifestyle choices Where you retire Leisure activities Necessary income 70-80% work income Length of retirement Average 19 years Savings amount 4% of assets yearly Health Care Source:

23 Specific Steps Start now, set goals, stick to them Know your retirement needs Learn about your employer s pension or profit-sharing plan Contribute to a tax-sheltered savings plan Contribute to an IRA Don t touch your savings Find out about your Social Security benefits Sources: US Department of Labor. (2006). Top 10 Ways to Prepare for Retirement;

24 Start Early Amount Accumulated Over Time Saving $4,000 at 7% Annual Interest $600,000 $552,948 $400,000 $200,000 $0 $23,003 $100,516 $252,996 5 years 15 years 25 years 35 years Source: US Department of Labor. (2006). Top 10 Ways to Prepare for Retirement.

25 Social Security The exact age you need to reach before being eligible for full retirement benefits depends on when you were born. before 1938, at age , between ages 65 and 67 after 1959, at age 67 Permanent, reduced benefits as early as age 62 Increased benefits if you wait until age 70 Source:

26 Retirement Satisfaction Four in five retired people-working or notare satisfied with their lives What makes the difference in those who are satisfied and those who are not?

27 Retirement Satisfaction Attitude Financial Well-being Physical Health Leisure Social Source: Keegan, C. Gross, S. Fisher, L., Remez, S. (2004). Boomers at Midlife 2004: The AARP Life Stage Study, Washington, DC.

28 Attitude I plan a lot for my future There is little I can do to change important things in my life Source: Keegan, C. Gross, S. Fisher, L., Remez, S. (2004). Boomers at Midlife 2004: The AARP Life Stage Study, Washington, DC.

29 Financial Well-being Very satisfied with current financial situation In control of finances Source: Keegan, C. Gross, S. Fisher, L., Remez, S. (2004). Boomers at Midlife 2004: The AARP Life Stage Study, Washington, DC.

30 Physical Health Excellent, very good, or good health Have health insurance Exercise and eat a balanced diet Source: Keegan, C. Gross, S. Fisher, L., Remez, S. (2004). Boomers at Midlife 2004: The AARP Life Stage Study, Washington, DC.

31 Leisure Great deal of control over leisure activities Source: Keegan, C. Gross, S. Fisher, L., Remez, S. (2004). Boomers at Midlife 2004: The AARP Life Stage Study, Washington, DC.

32 Social Relationships Very satisfied with personal relationships Satisfied with religious life Personal relationships better than expected or the same Source: Keegan, C. Gross, S. Fisher, L., Remez, S. (2004). Boomers at Midlife 2004: The AARP Life Stage Study, Washington, DC.

33 Activity is Key Regardless of age, gender, race, marital status, education, income, or mental and physical health, active retirees are more satisfied than inactive retirees. Formal or informal volunteering Working Taking classes Care-giving Source: Burtrica, B. and Schaner. (2005, July). Satisfaction and Engagement in Retirement. Perspectives on Productive Aging.

34 Retirement Quiz The age for receiving benefits without a reduction for early retirement has been raised. Instead of 62 years of age, most of today s workers will need to retire at or in order to receive full benefits. A. 65 or 66 years old B. 64 or 65 years old C. 66 or 67 years old

35 Retirement Quiz In order to be secure in retirement, workers should look to replace how much of their pre-retirement income? A. 35% to 40% B. 55% to 60% C. 70% to 80%

36 Retirement Quiz What trend should impact the way Americans approach retirement savings? A. More employers are offering pension benefits B. Less employers are offering pension benefits C. People are saving more

37 Retirement Quiz What should you do before deciding when to retire? A. Consult a psychic B. Find out when your friends plan to retire C. Perform a retirement calculation at

38 Resources AARP Social Security Administration ( ) Department of Labor Employee Benefits Security Administration ( EBSA) Financial Calculators lculator/index Lifestyle Information