Baby boomers have challenged notions of middle age -- now they’re redefining traditional retirement, too. Or should we say, postponing it entirely. The percentage of Americans over 65 who are still in the workforce is at a record high, according to the Labor Department.

Separately, a recent Gallup survey found the average working American expects to retire at age 67 -- up from age 60 in the mid-1990s. Roughly one in five workers now say they’ll retire after 65 -– up from about one in eight in 1995.

What’s going on? Recent reports suggest the economic downturn is largely to blame for keeping post 50s in their nine-to-five schedules: Some 40 percent of Americans age 50 and older have chosen delay their retirement in the wake of the Great Recession, according to a study released this month by the University of Michigan Institute for Social Research (ISR). It was the first study to correlate real data on household wealth just before and after the downturn with the retirement plans of a nationally representative sample of Americans age 50 and older. “The greater the loss, the more likely people were to delay their retirement,” said ISR economist Brooke Helppie McFall in a press release.

In addition, older workers who were pink-slipped during the recession and subsequently found jobs were out of work longer than their younger counterparts, and had to take deeper pay cuts in their new position, according to a study released last week by the Urban Institute. For workers 51 to 61, the average was 21 percent less that their previous salary, compared to 7 percent less for people 25 to 34.

Another culprit is a gigantic decline in confidence in the institutions that traditionally have been core to retirement planning: the stock market and Social Security. A Wells Fargo survey conducted in late 2011 found more than a quarter of respondents in their 20s and 30s don't expect any income at all from Social Security during their retirement years, and 68 percent of the survey sample said they were not confident in the stock market as a place to invest for retirement. As a result, respondents were delaying retirement.

The problem, as investing expert and author William J. Bernstein pointed out in a recent New York Times interview, is that workers can’t hit the target without taking at least some risk:

“The trouble is, of course, that almost no one can accumulate that much money — in rough terms, about 25 years of living expenses after Social Security and pensions — just by investing in safe assets. You have to take some risk to get there, and because you’re taking that risk, you may not get there. But taking that risk is still your best shot.”

Meanwhile, Americans who are relatively secure in their finances don’t feel they have enough to weather what the future might bring: A survey of households with assets between $50,000 and $249,999 found they are concerned about rising health care costs and tuition bills yet to be paid, according to a Bank of America report released last month. They, too, plan to work later than they’d expected to back when the economy was booming.

But the seeds for the postponement of retirement were planted decades before the current economic downturn. The massive shift from defined-benefit pensions to 401(k) plans, which put the onus on workers to plan for their own retirements, which extends back to the 1980’s and the Tax Reform Act of 1986.

In 1979, 62 percent of workers relied solely on defined contribution plans, while 16 percent had a defined contribution plan alone, according to the Employee Benefit Research Institute. By 2005, those percentages had nearly reversed, with 63 percent relying on 401(k)-type plans and a mere 10 percent with only a pension. In that time, workers have had to make enormously difficult projections about how long they might live; what their lifestyle would cost in retirement; how much they should save over time; and how to invest those savings.

For American families facing skyrocketing housing prices (at least before the downturn) and eye-popping college tuition bills, it’s been easy to push retirement planning to the back burner. The Wells Fargo survey found 69 percent of respondents had no written financial plan and more than half of those surveyed now felt “too far behind to catch up.”

The result: nest eggs that are vastly underfunded, as the Wall Street Journal pointed out in a recent analysis:

“The median household headed by a person aged 60 to 62 with a 401(k) account has less than one-quarter of what is needed in that account to maintain its standard of living in retirement,” the Journal noted

If there is a silver lining here, it’s that the decision to delay retirement is not entirely about money. Authors and advocacy groups have highlighted both the health and happiness benefits of continued work, as well as the the burgeoning trend of late-in-life reinvention.

In fact, three-quarters of middle-income Americans between age 50 and 69 say they are staying in their jobs because they “want to” versus feeling “stuck” in them because they can’t leave, according to a recent survey by Charles Schwab & Co.
Some 27 percent said this is the happiest time of their working career: They feel engaged, respected, valued and happy. Another 11 percent believe the best is yet to come.

”Working is clearly about more than the money,” said Carrie Schwab-Pomerantz, senior vice president of Schwab Community Services, in a press release. “Being in this age group myself, I can say from my own vantage point that the older segment of the workforce has a wealth of experience, perspective, talent and energy to offer their employers, and it’s great to get that validation from our survey.”

Check out the slideshow below for more on why a growing number of Americans are choosing to postpone retirement, from Charles Schwab's 2012 Older Workers and Money survey:

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  • They're Not Ready To Retire

    More than one-third of 60-somethings say they don't plan to stop working, versus 25 percent of 50-somethings. In fact, nearly twice as many workers in their 60s as 50s say they just don't want to retire (32 percent vs. 19 percent). Why? It may be flexibility: The study shows that people in their 60s are more likely to be working part-time and enjoying the flexibility of doing so. They are also more likely to enjoy the people they work with and to say they'd feel bored if they weren't working.

  • They're Still In Their Stride

    More than two-thirds of workers ages 50 to 69 consider themselves ahead of the game when it comes to job skills and report being "intellectually stimulated," "still learning" and "working to [their] full potential" at their jobs.

  • They Love What They Do

    More than two-thirds of respondents report that they were "intellectually stimulated" by their jobs, and more than half said they like what they do (interestingly, this percentage was higher among women than men).

  • They Like The People They Work With

    Nearly half of survey respondents reported that they like the people they work with.

  • They're Mentors To Their Younger Colleagues

    Sixty-eight percent reported that they provided advice to their younger colleagues on how to "handle professional issues," "how to navigate around the organization" and "how [they] can do their jobs better."

  • They're Worried About Money

    Half of workers characterize themselves as doing "ok" financially, and an additional 10 percent believe they're doing "well." But 31 percent feel they're "just getting by," and another eight percent say they're "falling behind." A majority express confidence that they'll have enough income to be comfortable in retirement (62 percent), yet their personal finances may not support that; nearly half have less than $100,000 in investable assets. Shedding debt is a top priority among workers in their 50s vs. those their 60s (51% vs. 42%).

  • They're Concerned About Caregiving

    Two-thirds of older workers worry about the prospect of needing to take care of a spouse or other family member; 37 percent believing they'll be faced with care-giving obligations in the next decade. With respect to personal responsibility for care-giving, many more women than men see this looming in their future (42 percent vs. 33 percent).