Retirement At The Tipping Point: The Year That Changed Everything

The current economic reckoning has created vast financial losses and uncertainty during the last year, triggering all generations to reassess the funding, timing and purpose of retirement. To learn precisely how this past year has altered Americans' retirement hopes, worries, and plans, my company, Age Wave, the nation's thought-leader on aging and retirement issues, and Harris Interactive, have surveyed thousands of Americans in a new eye-opening study, Retirement at the Tipping Point: The Year That Changed Everything. The results uncovered mounting fears and shifting plans, but also a renewed focus on what's important and an optimistic outlook about the possibilities for retirees' new role in American life.

A new era of cautious self-reliance is emerging from a truly unnerving fiscal dilemma. For many people, their retirement dreams have vaporized. Each of the four generations polled is trying to alter its game plan in fascinating ways to seek peace of mind and to make the best of the years ahead.

Exactly one year ago, in collaboration with Charles Schwab Corporation and Harris Interactive, Age Wave surveyed four generations on a wide range of probing questions about their retirement. According to Humphrey Taylor, Chairman of the Harris Poll, "This new study, Retirement at the Tipping Point, is much more than a snapshot of what people are thinking at a moment in time. By re-asking over 2,000 people across the generations some of the same questions we asked before the market crashed, we have a striking, in-depth view and measurement of the impact this disaster has on people's economic well-being and retirement plans."

Retirement at the Tipping Point revealed four key illuminating and provocative findings, including:

#1: Resetting the Retirement Clock

• Seven-Year Money Setback - Nearly 60% of Americans have lost money in mutual funds, 401(k) plans, or the stock market. Respondents think it will take an average of seven years for their investments to recover.

• Number One Fear: Uncovered Medical Costs are the Retirement Wildcard - The single biggest worry among those 55+ is that they will be unable to afford uncovered medical expenses (46%). This is now a greater concern than either lack of personal savings (18%) or uncertain entitlements (11%).

• Retirement Postponed - For the first time in U.S. history, we may witness a significant increase in the retirement age as respondents say on average they will now need to postpone retirement by 4.2 years - which will also adjust the "work-to-retirement ratio."

#2: Needed: Financial Rehab

• Lessons Learned - Only 4% of respondents strongly agree that Americans behave in a financially responsible fashion. 81% said that to "live within your means" was the most important financial advice parents could pass on to their children - jumping up from 69% a year ago. "Begin saving at an early age" came in second (65%).

• A Call for Financial Fitness at Every Age - An overwhelming 95% of respondents agree that financial management should be a standard part of high school curricula. Although 35 states mandate sex education, only three - Utah, Tennessee and Missouri - have, to date, made personal finance courses a requirement.

• Seeking Financial Peace of Mind - A majority of all survey participants (56%) agree that the best thing about having money is "feeling secure." In recent months, we have seen Americans go "back to basics" as evidenced by an increase in the savings rate, now over 4%, twice the savings rate over the past decade, and household credit card debt has dropped almost 10% from the prior year.

#3: Am I My Brother's Keeper?

• What We Value Most - The majority of respondents (58%) said that loving family and relationships are at the heart of what we hold most dear today - twice as important as being wealthy (33%) and twenty times more important than wielding power and influence (3%).

• Brother Can You Spare a Dime (or $50,000, or a bedroom)? With growing uncertainty about both government benefits and work security, millions of men and women are turning back to their families for financial assistance.

• The Sandwich Generation has Turned Into Multigenerational "Rubik" Families - Four out of ten respondents now worry they will have to financially support their parents or in-laws. This growing interdependence extends to siblings, with nearly a quarter of Millennials worrying they will need to provide care and support for siblings as well.

#4: Retirement Finds a New Purpose

• Out of the Ashes, New Possibilities - A new and, in some ways, more optimistic vision for retirement is emerging. 60% of Americans now say they view retirement to be "a new, exciting chapter in life" contrasted with 52% last year. And, 70% want to include working in retirement as a way to contribute, remain stimulated and pay the bills.

• Sage Elders Needed - Three-quarters of all respondents think our country would benefit in important ways if retirees were more involved in contributing their valuable skills and experience to our communities, with the most enthusiastic response coming from retirees themselves (83%).

• The Emergence of Philanthropreneuring - As I've written about in my book, With Purpose: Going from Success to Significance in Work and Life, with growing interest in civic engagement, the majority (57%) of respondents would prefer a volunteer activity that makes use of their full range of work and life skills and experience - rather than basic service and support tasks.

According to Age Wave's Senior VP of Research, David Baxter, "While we discovered both disturbing and encouraging signs about retirement from each generation, there are indications that of all cohorts, it's the Millennials that are coming out of this financial storm a wiser, more cautious, and more responsible generation. They were the most likely to have learned valuable lessons about financial responsibility and had the biggest jump over the past year in their concern about living within their means (63% to 81%)."

There's no question that this past year has been a time of struggle and worry. At this point, most of us are taking a deep breath, assessing the damage and trying to figure out how to move forward. As we reviewed the survey results, we couldn't help reflecting that Retirement at the Tipping Point demonstrates the fortitude and resilience of our country as we re-think the funding, timing and purpose of retirement. Though the study uncovered anxiety and uncertainty necessitating shifting plans and priorities, it also revealed a hopeful outlook as a new, more engaged and sustainable model of retirement is being envisioned.

Please visit http://www.agewave.com/RetirementTippingPoint.pdf for the complete, downloadable Retirement at the Tipping Point report.

***

Ken Dychtwald, Ph.D. is a psychologist, gerontologist and author of sixteen books on aging, life transitions, and retirement-related issues including Age Wave, The Power Years, and his new book, With Purpose: Going from Success to Significance in Work and Life (with Daniel J. Kadlec, Collins Life; 3/09). The founding CEO of Age Wave, he lives with his wife and children in the San Francisco Bay Area.

Comments

[dadw5boys]

Live -- BELOW -- your means !!!!!!

You must save something. Do nor spent everything every month.

If you do not have at least $10K in the bank your setting yourself up for failure.

Save at least $2 of every $5 you make.

.

[LauraRossman]

Hi Ken
Great confirmation of what we are seeing in the marketplace with boomers especially. Still too early to tell whether this is a ture tipping point and we will slowly slink back into our old financial habits or this really is a reset of what we think retirement will be. I think people are truly creating a New Plan A, but we'll see. I wirte about many of these intergenerational money issues at www.moneyinthemiddle.com.
I was curious about the response by the Millenials to your question about taking care of siblings. When I speak with boomers about taking care of siblings there are lots of sighs and nodding heads. Yet your research shows the younger generations worry more about the need to support a sibling or sibling-in-law. what do you think is going on? Millenials watching what's going on in their families? Too many dysfunctional families on TV with the younger borther/sister moving in? Or are they just a more responsible generation thatn the boomers?

[Ken Dychtwald]

Hi Laura,
Thanks for your comments. I think that these Millennials are taking note of so many things and are building their own internal equation of what's going on in the world - and what their future may look like. It would appear that they're noticing that some of their parents are falling on hard times, some of their siblings are struggling and some of their friends aren't making it. And, because many seem to be sympathetic to the plight of others and "conscious" in their worldviews, they're considering the very real possibility that they might have to provide some "helping out" along the way. Keep in mind too, that on so many of the popular TV shows, friends live together, siblings co-raise children and parents screw up and need to be bailed out. For example the top TV show among this generation is "The Simpsons" in which Homer is no "father knows best."
What do you think?
All the best,
Ken

[William1950]

retirement... buy a teepee and find a friend whose backyard you can put it in... or a spot of national forest land you can squat on... learn to forage for food... get good with a sling shot, and don't - for any reason - get sick.

[Hailmaryyy]

There will be millions of fewer jobs. It could take longer than 7 years for some people to recover their losses in their 401(k) plans and IRAs. The solution to this crisis is found in the book How America Can Escape the New Great Depression. The argument put forth is that since there will be millions of fewer jobs our society has a choice of having either millions of unemployed workers or millions of younger retirees. Lowering the eligibility age for Social Security and Medicare will open up jobs for younger workers. It also calls for current Social Security recipients to receive a large raise.

The way things are going most people will run out of money in retirement.

http://escapethenewgreatdepression.com

[PragmaticStatistic]

The survey paints a rosier picture than exists and fails to take in that what full employment will mean from now on.

According to the article "‘Great Recession’ Will Redefine Full Employment as Jobs Vanish" on Bloomberg.com, economists are now calling our present economic crisis a "Great Recession" that will redefine what full employment means.

Check it out at:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aOhkusQ9LifQ

According to the article, the new economy will pay less, offer fewer jobs, have an unemployment rate above 6% or 7%, and a typical 40-year-old man who becomes unemployed will suffer a 20 percent loss in lifetime earnings. From my experience, if you are 60 and unemployed your prospect are few. And, if you had to sell your 401K in the last few months in order to survive, your struggling to make it to early retirement on Social Security.

[Ken Dychtwald]

Hi Pragmatic,
Thanks for your comments. Actually, the survey paints a picture of "what is" - that's what the survey does. It may feel rosier than the way you see things or than you have interpreted the data - and as we know, there's all kinds of data to interptre, depending on what you're interest is. If that were so, than your perspective may be "gloomier" than what exists. When I have overseen massive studies of this nature, it's always a challlenge to step back from what I think and listen to what people actually think and feel (or at least what they say). One of the biggest aha's of this study is that the American people are far more positive and hopeful - even in the face of a great deal of personal stress and damage - than the media portrays them. As someone who was initially trained as a psychotherapist, I'm beginning to wonder if our "experts" aren't somewhat hysterical (in a psychological sense) and because they all talk to and confer with each other, they may be twisting the actual population sentiments somewhat. What do you think?
All the best,
Ken

[PragmaticStatistic]

You are right that most people will generally seek a positive outlook, to do otherwise is self-defeating. As a result they would answer a survey with a positive outcome unless the questionaire is designed to dig out how they truly feel unfiltered.

As a former ad agency executive, I reviewed hundreds of surveys from other AAA association agencies that I felt were more leading than they had value. For example, if you asked if the survey taker was familiar with your brand and you provided a list of 5 names to choose from, one of which was your brand, your chances of being remembered grew as opposed to providing a blank to be filled in based on what the survey taker would remember on their own. As a result the question is prompted and your odds of getting selected increase. Few surveys allow the person answering the survey to comment without being prompted either through how the question presented or how the multiple choices are staged.

I would change my opinion of your survey if it contained questions like the following:

Are you still financially able to retire comfortly since the crash of the economy?
-- If you ARE able to retire comfortably, do you prefer to: A) Play golf, B) Volunteer, C) Doing nothing, D) Other _______
-- If you are NOT able to retire comfortably, are you able to find employment? Yes/No
-- If you cannot find employment, how do you feel about your prospects of retiring: Good/Bad

[BillGriffithJrCFP]

Hi Ken,

Great comment by WilliamProc about the evaporation of pension funds and employee profit sharing. I totally agree with you that the shift away from defined benefit pension plans is at the root of many people's challenge with funding retirement. I cover this issue in great detail in my book Securing a Retirement Income for Life and the fact that the shift to defined contribution plans is a trend that has revolutionized retirement planning by placing more of the responsibility for saving on the individual. Now more than ever, people are faced with having to make serious decisions about how to manage their company retirement plan, how much to contribute, how to invest their money and what to do with their vested balance after they retire.

Bill

[ringo3khan]

I can't even begin to imagine a response to this article. I'm 55 and after observing the layoffs, it's obvious to me that U.S. Corporations expect people to be ready to be off'd at 59; if your not financially independent by then, you're excess bagage. In a society that values only youth, beauty and money, by the time you're 59 your down 2 outa 3 and had better have a stash of bucks to fall back on. As for the volonteer bit; I guess that's o.k. for some people, but the prospect of more face time with these people leaves me cold. After the last 10 brutal years of storms on the Gulf Coast accompanied by the typical shoot'n loot, we've made plans to scale back, head for the hills, to hunt and fish and to live off the grid to the extent possible. I got outa the stock market in 2007, never to return and now I'm moving out of the dollar. Beyond that I have no plans but I'm looking forward to t.v. free life.

[WilliamProc]

Odd that the one thing that I thought would be in this article, but isn't , is the evaporation of pension funds and employee profit sharing.

When my father retired 4 years ago, his company's pension and profit sharing plans allow him and my mother to have far fewer worries about healthcare bills and just getting by. That the majority of American companies have eliminated these; I believe is a huge contributor to the deferment of retirement. Many have to choose between taking an earlier retirement, with less monthly benefits , or work into their 70's, which is becoming impossible due to the reluctance of comapnies to hire older workers.

I applaud the efforts of yourself and AgeWave in addressing this issue! Many thanks!

[Ken Dychtwald]

Hi William,
Thanks for respodning to my blog. If you take a look at the whole study report (downloadable for free at http://agewave.com/RetirementTippingPoint.pdf.) and take a look at page 5, I think you'll agree with how the shift in pensions is at the root of many people's challenge with funding retirement. I also covered this theme is far greater detail in my book Age Power, in case you're interested.
All the best,
Ken

[BeachBubbaTex]

Great post (and great timing for your study). I agree with your later assessment about the millenials. As in the 1950s, US youth culture seemed to skip a beat with the 1980-90s generation. Given the culture of these years it is no wonder. The millenials seem the most interesting, the most informed, and the most pragmatic cohort to arrive on the scene since the 1930s-40s. Definitely worth the academic interest. My wife and I were part of the lost generation (in our teens and early twenties in the 1970s... to young for boomers, too old for Gen X), but our kids are millenials. I can only hope that the trend towards informed pramatism deepens and spreads in the coming years.

[follow the money]

I got one for you...

do you remember this one???

the plot to kill Social security
salon.com

http://dir.salon.com/story/tech/feature/2003/06/12/tax_cuts_and_social_security/index.html

[asjogren]

A couple of ideas from our experience. We retired early. We downsized from a house to 2 small condos and are snow-birds.

In winter we live in a tiny studio condo on the beach in northern Mexico. We volunteer in a couple of schools in Guaymas, Sonora - one is public and the other is private. The public school is like a community college. We are simply native English speakers helping the Mexican teacher once a week. We learn SO MUCH from our volunteering - culture, language, values, etc. The students are greatly appreciative.

The other school is a private grammar through high school - where the wealthier parents send their children. Here we facilitate team projects, leadership, and enrichment in English. We work with high school students whose English skills approach fluency. While mentally more challenging, and a better use of our pre-retirement skills - this group can be quite frustrating. But, it can have immense rewards when a student who has never been a leader before tries and succeeds. Appreciation - not so much.

We find our expenses are reduced quite a bit in Mexico. And our connections to people stronger. And learning a new language and culture keep the gray matter stimulated better than Solitare. And lastly, we don't put up with Seattle winters.

[Ken Dychtwald]

Hi Asjogren,

Thanks for reading my blog and sharing your story. It sounds like you've crafted a very "purposeful" life plan - great combination of elements! I've often wondered - when people like you spend part of each year in a foreign country, do youu miss America, do you miss your family/freinds, are you worried about healthcare if you need it?
thanks
Ken

[asjogren]

Ken,

Good questions.

Health care and dental care are more affordable here. Dental care costs me what I used to pay in Seattle AFTER insurance. My health insurance is much cheaper because I spend at least 6 months outside of the USA and Canada. But, unless we become full time in Mexico I think we need to return to the USA at age 70 because the cost of private insurance becomes exorbitant. Many of the MDs here actually went to Medical School in the USA. However, if I got Cancer or a serious Heart problem I would probably take the 6 hour drive to Tucson.

Do I miss America. No. The more we get to know the culture in Mexico, the better we like it. It is NOT a consumer culture. However, I would love it if Amazon.com delivered to the door for cheap.

As for family and friends - that is a mixed bag. We do get visits from family and friends. Being in a sunny place in winter on the beach is a good excuse for a visit. But, there tends to be some resentment that we do not return for Christmas.

People are more friendly here - even Gringos. Maybe it is the sun and warmth. Maybe it is the outdoor living. Or, maybe it is that we are all strangers in a strange land. And we need each others experiences to figure out how to do things in an alien environment.

[judiNJ]

I am also a retiree, albeit against my wishes as I was let go from my job in Sept. I also am involved in being a volunteer as well as continuing to look for another job - (what? at MY age?) I come from an educational publishing background, so I have signed up to volunteer as a tutor in reading and ESL as well as with a local humane society to walk dogs (great exercise and I love animals). I am receiving unemployment as well as S. S. and (thank heaven's - Medicare) so I feel like I need to give back something to my community. As far as savings go, I dumped all my 401K and IRA savings into secure accounts in 2001 because I do not trust Republicans. Needless to say, they did not boom but they did not bust either and I did not lose anything. At this point, I would love to see more opportunities for retirees as we have tons of experience and so many of us are willing and able as well as needing extra money now.

[jerrypl]

There now is a new American Paradigm digging its heels into the fabric of the American way-of-life. Retirement no longer can be a goal for many working Americans. That dream has been taken away; therefore, as older workers stay employed longer, fewer young, new college graduates will find meaningful work in their field's of expertise because there will be fewer opening that would have been made available by retiring workers. Pensions will become a thing of the past for many corporations that will eventually do away with them.

Consumer spending will no longer be 72% of the GDP, but 45% or so of our GDP as fewer Americans will risk excessive borrowing binges for vacations, cars, bigger homes and additions. More working people will do without, and own their possessions for longer periods of time before replacing them.

High un-underemployment rates will be long lasting. The world economy will shrink. The world will see greater poverty.

It is the responsibility of the government to foster a Green manufacturing New Deal in order to produce new jobs and products that are sustainable for domestic use and to export to the world. This is the only way out of this mess. It is NOT to enrich the bankstas. FDR never gave the bankstas free money to thrive during the depression.

http://eye-on-washington.blogspot.com

[judiNJ]

Amen!

[SaltySaltillo]

While I understand my parents' pain, and the pain of individual home owners who find themselves "upside down" in their homes, I cannot help but feel smug sometimes knowing that the greatest intergenerational wealth transfer heist I know of in my lifetime was effectively terminated when the bottom fell out of the real estate markets in California, Florida, and elsewhere. I am now quite happy knowing that young people just starting out in life have a reasonable chance of becoming homeowners, something that was made impossible in the early 2000s.

[PragmaticStatistic]

My wife and I recognized that our children were not going to be able to buy a home like we did, and that the housing prices would have to eventually tumble in order for them to do so. So in 2007, we made the decision to sell our home in order to retain the value of our investment and relocated just as the floor fell out in the real estate market and bought a smaller house. You would think this would be great, since we are near retirement age, our investments and profit on our home sale should leave us with the money to retire and money for the kids for to inherit for a down payment on their own homes.

Unfortunately the falling home prices ruined the economy and our 401K plan, and along with it providing us with unemployment. So while home prices and interest rates are at an all time low, it just became harder for the kids to come up with the down payment requirement because their inheritance is now gone despite our best efforts to salvage it.

[mikemilton]

I am a retiree. I would love nothing better than to contribute and I'm not looking for a significant income to do so. However, it really seems that most businesses want people to suffer through their employment. Personally, I'm not interested in permanent employment and even brief contracts seem to come with an expectation that one will meet onerous expectations

If there really is to be a breakthrough in capturing the value inherent in myself and millions like me then there needs to be a significant change in offered working conditions.

Why live in a Dilbert cartoon if you do not have to - be welcoming, flexible, and respectful and all I have is yours.

m

[Aaror]

Volunteer at schools!!!
If Retirees went to schools and helped out, our kids would benefit from your experience, and it would reduce the burden on teachers. You can give one-on-one teaching to children and really help future generations.
Can you think of a more rewarding use of your time (even if you don't get paid for it)?

[Ken Dychtwald Ph.D. - Huffpost Blogger]

Hi Aaror,
If you download the entire "Tipping Point" report, (http://agewave.com/RetirementTippingPoint.pdf) you'll see that three quarters of Americans feel that everyone would benefit if retirees were to contrinute more of their time and experience to community life - with 83% of retirees enthusiastically agreeing. This is important because right now, retirees have a great deal of free time and lots of taloent, but a relatively low volunteer rate.
Maybe a new era of retiree civic engagement is emerging - which would be a good thing with so many boomers about to enter this lifestage....don't you think?
All the best,
Ken

[mikemilton]

That is a good thought (there are also other volunteer opportunities).

One reason I do not do this is that my knowledge is not particularly applicable or helpful to that age group (I have done some graduate level stuff as a practitioner). I suspect (hope?) my forest management effort is more productive - so that is where time gets spent.

More broadly, volunteering is great and it covers off efforts that are otherwise not addressed. That said, it can leave untapped the specialized skills that go dormant at retirement. These latter skills (IMHO) could make a greater contribution to overall economic performance.

[Ken Dychtwald Ph.D. - Huffpost Blogger]

Hi Mikemilton,

Thanks for responding to my blog. I COMPLETELY agree that both companies and volunteer organizations would be wise to be more flexible in their scheduling and more imaginative in their offerings to seasoned men and women. There's an emormous amount of talent waiting on the sidelnes in our youth-focused work-world.
All the best,
Ken

[medicim]

Actually I think volunteerism in certain areas is a mistake. It depresses wages for workers and is inefficient. There should be no unpaid "volunteers." Everyone should be paid for their labour - or no one should be paid and we all agree to live an an actual living allowance. When I see schools, community centres, libraries relying on volunteers and I know that we have high and growing unemployment, then I see a dysfunctional system. If retirees feel undervalued and at a loss as to how to contribute to society, then I think this is a result of social failure. People who have been vital to their communities and not just to their professions will always have a sense of connection and purpose.