Older workers, slammed by losses to their 401(k) accounts, are postponing their retirement, according to a survey by consultant Watson Wyatt Worldwide.
Forty-four percent of workers aged 50 and older said they had increased their planned retirement age in the past 12 months, the survey of 2,200 full-time employees found. A third of all workers surveyed said they were planning to postpone retirement.
Workers nearing retirement (ages 50 to 64) said the main reason for the delay was the decline in value of their 401(k) accounts. The survey, conducted in February, also found that workers participating in DC-only plans were more likely to put off retirement than those in defined benefit plans.
Separately, a Mercer study released today said workers older than 55 would have a difficult time making up losses in their DC plans before retirement. The analysis, which looked at the 1.2 million participants in DC plans administered by Mercer, found that from Jan. 1, 2008, through April 30, participants over the age of 55 lost an average of 16% of DC assets. This compares with a gain of 24% for workers under 30 who have smaller balances and have been able to recover losses through new contributions, Bill McClain, a principal in Mercers DC practice, said in an interview. With the older workers, its simply harder to move their bigger ships, he said.
To make up the losses, Mr. McClain said older workers have three choices: Increase contribution levels; move into more aggressive portfolios in the hopes of snagging bigger returns; or retire later. The study found that participants over 55 have on average decreased their pretax contribution rates to 8.8% in April 2009 from 9.2% in September 2008. Meanwhile, older workers upped the percentage of their DC assets in capital preservation to 39% from 30% as of April 2008.
Its not likely older workers will see stellar investment returns or increase their contributions, considering most households are strained right now, Mr. McClain said. Whats left is delaying retirement, which is certainly a growing trend.