After the Crash, a New Realism Emerges About Retirement

06/05/2009 05:12 am ET | Updated May 25, 2011

Three months after President Obama's inauguration, one phrase from his speech on the steps of the Capitol comes back to me often: "The time has come to set aside childish things."

That line, which quotes loosely from 1 Corinthians:13 in the New Testament, refers to our collective need to wake up to the realities and challenges facing the country.

Where retirement planning is concerned, childish behavior wasn't hard to find before the economic bubble burst last fall, and the ensuing economic crisis has provided a loud wake-up call.

The huge generation of baby boomers now approaching retirement has been forced to stop kidding themselves. Housing values and stock prices won't appreciate forever. Home equity can't be raided at will to finance expensive travel and second homes--at least not risk-free. Saving money for retirement does require setting of goals and planning.

Boomer retirement has been a train wreck waiting to happen for some time now. And in the post-bubble environment, most of the talk has focused on the pain that's immediately before us: decimated 401(k) and housing values, foreclosures and layoffs.

That's the close-up on the crisis. But step back and you can see the beginning of some positive changes surfacing in the way Americans think about retirement, and in expectations about how they will live in the years ahead.

"People are not just looking at what they have but at the meaning of how they will live," says Laura Rossman, principal of OutsideInsite, a consulting firm that specializes in boomers and seniors.

"They're realizing that they may need to put off retirement and be realistic about what it takes--not everyone can retire at 58. The market drop is so severe, and no one ever expected anything like the severity of the shock. It is changing some behaviors, and at least for now, people are resetting their views."

This new realism surfaced in a striking set of data released this month by the Employee Benefit Research Institute (EBRI), a research organization focused on health, savings, retirement, and economic security issues. The headline finding in EBRI's 19th annual Retirement Confidence Survey (RCS) is that just 13 percent of Americans feel confident that they'll have enough money to live comfortably in retirement. No surprise there.

But some of the other findings were eyebrow raisers. Workers say they expect to work longer to secure their retirement. Twenty-eight percent of workers say they have changed their target year for retirement in the past year. And within that group, 89 percent say they did so in order to boost their financial security. More people also say they plan to supplement their income in retirement by working--72 percent compared with 66 percent just two years ago.

The RCS also suggests people are behaving more like grownups when it comes to money management. Among those who've lost confidence in their retirement security, 81 percent say they have reduced expenses, and 43 percent have changed the way they invest. Twenty-five percent are saving more money and an equal number are now seeking advice from financial professionals.

Finally, EBRI reports that among all workers, 75 percent say they have saved money for retirement, one of the highest levels ever measured by the RCS.

Rossman sees a new set of expectations coming for retirement--less focused on material goods and more on experience and values. "It's going to be an era of simplicity and new priorities--less is more."