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Working in Retirement Grows as Many Fear Financial Security

Aug. 15, 2012 — Many people are discovering they will need to continue working in retirement in order to prevent a major decline in living standards, according to a report from the Society of Actuaries (SOA).

Among the findings that are from the "2011 Risks and Process of Retirement Survey Report," 35% of pre-retirees surveyed do not expect to retire, up from 29% in 2009. Although the majority of pre-retirees as well as retirees say the desire to stay active and engaged is a reason to work in retirement (with 89% of pre-retirees planning to work and 77% of retirees already working), financial concerns also play a critical role in the decision. In fact, more than 4 in 10 pre-retirees who do not expect to retire say it is because they are financially unable to do so (45%).

Of the respondents with financial concerns, many indicated they planned to work in retirement because they wanted:

  • Additional income (74% of retirees, 87% of pre-retirees)
  • To preserve or build up assets (59% of retirees, 80% of pre-retirees)
  • To keep employee benefits (33% of retirees currently working in retirement, 61% of pre-retirees).

"Current trends in retirement indicate that people may need to work longer than they originally planned," said Carol Bogosian, ASA, actuary and retirement expert. "Individuals often have a difficult time estimating how long they can expect to live, how much they will earn on their investments, and how much they can spend each year to avoid running out of money. In fact, many people are just guessing about how much they will need in retirement."

While many pre-retirees are planning to work in retirement, those who eventually expect to retire think they will work longer than current retirees actually did. While half of retirees report they retired before age 60 (51%), just 1 in 10 pre-retirees think they will retire that early (12%). Instead, half of pre-retirees expecting to retire say they will wait at least until age 65 to do so.

"There is a big gap in the age at which pre-retirees expect to retire and actual retirement ages of those who have retired from their primary occupation," Bogosian said. "This may be partially due to involuntary retirement and health problems. This gap, together with the failure of many people to plan for a long enough retirement period, may indicate significant future financial problems for many."

The survey also indicated that many do not appear to understand the benefits of delaying retirement, which may be an important financial strategy for those who do not have enough resources, Bogosian said.

In addition to financial aspects of working in retirement, the report also highlights data surrounding the type of work retirees choose to do, including:

  • 50% of retirees who work in retirement find employment with a company other than the one that employed them pre-retirement, while only 29% report working for the same company as before retirement.
  • 40% say they used entirely different skills in their post-retirement employment, while 39% of pre-retirees also plan to rely on other skills.
  • 22% of retirees working in retirement indicate they started a small business or became self-employed when they retired. Similarly, 31% of pre-retirees who plan to retire say they will start a small business.

"The 2011 Risks and Process of Retirement Survey" was conducted on the SOA's behalf by Mathew Greenwald and Associates, Inc., and the Employee Benefit Research Institute (EBRI) through telephone interviews of 1,600 adults ages 45 to 80 (800 retirees; 800 pre-retirees — twice the sample number of prior surveys) in July 2011, before the most recent stock market volatility, U.S. debt downgrade and numerous federal interest rate announcements. Households were selected for participation from a nationwide targeted list sample. The margin of error for study results, at the 95% confidence level, is +/-4 percentage points for questions asked of all retirees or all pre-retirees.

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