Imagine that you've followed the rules to have a proper retirement for decades.
You've worked diligently, saved some money and you're ready to kick back in a lounge chair and enjoy the fruits of your labors. But then something big goes wrong—the economy tanks and there will be no fruits, metaphorical or otherwise.
This is the situation in which our retirement-age Baby Boomers find themselves. Thanks to the recession, many would-be retirees are unable to retire at the traditional age of 65. After losing the bulk of their retirement savings, they're looking at re-entering or staying in the workforce ... but it's not that easy.
In fact a recent survey from Wells Fargo and Gallup found that 45% of nonretirees feared low interest rates might result in them outliving the money they'd saved, and a third said low interest rates would cause them to delay retirement.
The plight of the Baby Boomers is an unfortunate example of how even the best-laid plans can go wrong due to circumstances beyond our control. We hope hope hope you never find yourself in a similar situation, but if something should go awry in the future, this is what you might expect--and we will show you how to be prepared for it
Aging Workers Seek Work, Find Hurdles
The percentage of workers over 65 is at a record high. And or the first time since 1981 (when the government started keeping track of the numbers), one in nine American men over the age of 75—ten years past the traditional retirement age—is working. (Which is astounding considering that 75 is the average life expectancy for American men.)
Workers nearer retirement are pursuing employment, as well. According to Manhattan Institute senior fellow and former Department of Labor chief economist Diana Furchtgott-Roth, workers age 55 and older are the only group who has made employment gains in the past ten years, most likely out of need.
And there are more older workers who would like jobs but can't get them. In fact, over half of older workers have actively looked for employment for over six months, according to a recent report from the Government Accountability Office, which recommends policies to help them, such as subsidizing businesses that hire older workers, creating more job training programs for seniors and compensating workers over the age of 55 who accept lower-paying jobs.
The government is trying to help because many employers hesitate to hire older workers for several reasons: Companies know retirement is on the horizon for them, are unwilling to pay them more for their experience or prefer young workers who can be shaped by the employer from the get-go.
Even Retirement Savings Plans Have Changed
Even older workers who have saved a lot for retirement and don't necessarily need to work are having to change their retirement plans. Financial Planning magazine explains that investments in fixed-income securities—those that are "safe" and "guarantee" a certain gain—actually have not been giving those guaranteed returns since the financial markets collapsed.
This means even responsible investors who went the conservative route and saved a lot of money in low-risk investments have suffered, sometimes even losing the money they originally invested. Now, some new borrowers are even being offered returns of .7% from banks for certain securities ... as opposed to the 4% and 5% returns those same securities were offering only a few short years ago.
What This Means for Your Retirement Strategy
The thing about the recession is that for all intents and purposes, it was a black swan—an unforeseen event that changes your entire perspective. And however much conservative investments may have lost, they certainly lost less than riskier ones, which is why, as you get closer to retirement, you'll likely own more conservative investments.
Another way to help prevent being caught off guard by dips in the market is to contribute to retirement as early as possible and as much as you can. (Don't know where to start? This guide will point you in the right direction.) You should aim to save enough to maintain a standard of living similar to what you enjoy now. If you don't know how much money it will take to keep you solvent, try out this calculator.
And finally, you never know what the future holds, so it's always best to consider all kinds of scenarios when setting up your retirement plan. If you make it to 65 without a global recession hurting your retirement plans, then great! We would love for you to be able to retire to a beachfront home the day after your 65th birthday. But make sure your plan accounts for the possibility that an economic downturn might hit when you turn 64. That way, if it does, you'll still be okay.
Another option? Do your best to find work that you love. That way, if you do have to stick with it a little longer than planned, at least you'll be happy to do so.