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Why Americans are Delaying Retirement

Emily Brandon

Workers are growing increasingly pessimistic about their ability to retire. The proportion of Americans who say they are very confident they will have enough money to live comfortably throughout retirement plunged from 27 percent in 2007 to 18 percent in 2008, and never went back up. In 2012, just 14 percent of individuals feel very confident about their financial security in retirement, according to a survey conducted annually by Mathew Greenwald and Associates and the Employee Benefit Research Institute. In contrast, 47 percent of workers say they are not confident they will have enough money to live comfortably throughout their retirement years. Here's a look at why many workers no longer think they will be able to retire well.

Little savings. The proportion of workers who say they or their spouse have saved for retirement has declined from 75 percent in 2009 to 66 percent in 2012, the EBRI telephone survey of 1,262 individuals age 25 and older found. And most of the people who have saved haven't accumulated much. Some 60 percent of workers say they have less than $25,000 in savings, excluding the value of their primary home and traditional pension plan. And 30 percent of those surveyed have less than $1,000 in the bank. "A distressingly large number of workers say they have no savings or investments," says Jack VanDerhei, EBRI research director. "Far too many people simply do not or will not take the first step to plan for a comfortable retirement."

Job insecurity. It's difficult to plan for retirement when you're concerned about how long your current job will last. Just 28 percent of workers feel very confident that they will have paid employment for as long as they need it, EBRI found. And only 9 percent of the 259 retirees surveyed think they could find paid employment in retirement if they wanted it. "Retirement is not Americans' major concern right now. Job security and financial security are," says VanDerhei. "Many workers have more immediate worries than saving for retirement."

Too much debt. Paying off expensive debt often takes precedence over saving for the future. Almost two-thirds (62 percent) of workers say their current level of debt is a problem. The same proportion of workers (62 percent) report feeling financially stressed. "Those who have little or no debt report much more retirement confidence than those who have major or minor debt," says VanDerhei.

Investment uncertainty. IRAs and 401(k)s don't come with a guarantee that your money will increase in value, or even that the money you save will be there tomorrow. Only 16 percent of the workers surveyed say they are very confident their investments will grow in value.

A lack of financial knowledge. More than half of workers (56 percent) have never tried to calculate how much money they will need to live comfortably in retirement. When workers were asked to evaluate their progress in investing for retirement, 67 percent say they are behind schedule, up from 55 percent in 2005.

Growing medical costs. A single health problem could throw your entire retirement plan off track. Very few workers feel certain they will have enough money to pay for medical costs (13 percent) and long-term care expenses (9 percent) throughout retirement.

Less generous retirement benefits. The proportion of private-sector jobs that provide traditional pension plans has been declining for decades. But most workers still hope they will eventually find a job with a traditional pension. Over half (56 percent) of workers say they expect to receive benefits from a traditional pension plan in retirement, despite the fact that only 33 percent report that they have ever participated in this type of retirement plan at a current or former employer.

Declining expectations. Early retirement is no longer a realistic goal for most workers. Instead, many people are pushing back their retirement age to give themselves more time to prepare. "Many people will work longer and, in the process, considerably reshape the workplace," says Mathew Greenwald, president of Greenwald and Associates. But he cautions, "Promising to do something in the future is easier than action today." The proportion of workers who expect to retire after age 65 has steadily increased from 11 percent in 1991 to 37 percent in the 2012. And a quarter of those surveyed say their expected retirement age has changed in the past year, typically to an older age.

A realistic assessment. Although most Americans are feeling considerably more pessimistic about their retirement prospects than before the recession, this may also be the first time workers without traditional pensions are realistically assessing whether their current savings rate will fund a comfortable retirement. "There was a tremendous amount of false optimism," says VanDerhei. "After the 2008 and 2009 market crisis ... they then realized that they were not on track and their confidence went down. There is less false optimism in 2011 and 2012 than there had been in prior years."

There's still time for many baby boomers to correct their retirement preparedness, but it is likely to take a considerable amount of diligent saving and continued employment. "Workers are falling farther behind and they know it," says Greenwald. "To some extent, a lack of confidence is good because no confidence is better than false confidence if it leads to action."

Twitter: @aiming2retire

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