The Homa Files

Excerpted from WSJ: “Baby Boomers Delay Retirement
Declines in Assets Force a Generation to Face New Reality”,
Sept. 22, 2008 
 

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In May, 27% of surveyed workers age 45-plus said the economic slowdown had prompted them to postpone plans to retire.

For millions of Americans approaching retirement, events of recent weeks are delivering a clear message: Not so fast. With nest eggs shrinking, housing prices still falling and anxieties about their financial future growing, the oldest members of the baby-boom generation are putting the brakes on plans to leave work.

Most people underestimate how much money they will need for retirements that could easily last two or three decades, and are leaving the work force with nest eggs that are likely to expire long before they do.

Less than one-quarter of workers age 55 and older — just 23% — have savings and investments totaling $250,000 or more. About 60% have less than $100,000.

The average retirement age in the U.S. is 63 — but most investors don’t recognize the benefits from working even just two or three additional years. For example, a 62-year-old with a $100,000 salary and a $500,000 nest egg will see his annual retirement income from investments and Social Security rise by 6% for every additional year he remains in the work force.

Working longer “gives people time to build up their 401(k) balance, can result in a bigger benefit from Social Security, and reduces the amount of time people will have to depend on their savings. “The arguments in favor of working longer are overwhelming.”

“It’s particularly tough if the market gets hit in your early years of retirement. If you’re about to retire and something like this happens, maybe you should stay working.”

Retirees returning to work — is also being played out in the wake of the market turmoil. “I’m trying to go back to work and let our portfolio build back up,” he explained. “We’ve lost such a big amount of money lately, we’re going to get to the point where we can’t recover.”

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Full article:
http://online.wsj.com/article/SB122204345024061453.html

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This entry was posted on September 22, 2008 at 7:31 am and is filed under Retirement - Social Security. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.