Many seniors planning for their retirement have found their parental responsibilities haven't quite ended. Others' financial plans simply haven't recovered from the shock of the Great Recession.
As a result, new research shows that 40 percent of older Americans postponed retirement after 2008. The research is the first to link actual data on household wealth just before and after the downturn to the retirement plans of a nationally representative sample of Americans age 50 and older.
"The typical household lost about five percent of its total wealth between the summers of 2008 and 2009," said Brooke Helppie McFall, an economist at the University of Michigan Institute for Social Research (ISR). "The average person would need to work between 3.7 and 5 years longer than they planned in order to make up the money they lost."
But people do not intend to work long enough to make up everything they lost, according to McFall.
Trade-offs
"In considering when to retire, people make trade-offs between their desire for more leisure and for more time to spend with friends and family, and their desire to be financially secure in retirement," she said. "So the typical person we surveyed who planned to work longer because of the recession only planned to work about 1.6 years longer than they had originally planned. That isn't long enough to make up what they lost, but they're trading off time for money."
And that means the kids are on their own. McFall found that people who decided to postpone retirement also expected to leave less for their heirs.
Some people, of course, are in better shape than others. Those who started saving earlier and more aggressively are better able absorb the recent losses. McFall found that people who were pessimists about whether the stock market was going to rebound in the next year, and people who were within two years of their initial retirement age, were the most likely to say they planned to work longer.
"I also found that the greater the loss, the more likely people were to delay their retirement," she said. "Still, very few people decided that they would work long enough to recoup their entire economic loss."
In the analysis, McFall took into account financial wealth, including stock market, cash and retirement accounts, and net equity in housing wealth, as well as the likely value of future earnings. She also notes that her study has a personal basis.
"I became interested in this topic after my mother-in-law decided to postpone her retirement as a result of the Great Recession," McFall said. "She decided to put it off for two years, and then to work part-time for a while instead of quitting all at once."
How they voted
Yes
Yes