Even as stock prices rise, unemployment drops, and overall recovery takes hold, more U.S. workers than ever are planning to delay retirement, according to a new Executive Action Report from The Conference Board. Trapped on the Worker Treadmill? revisits research questions originally incorporated in The Conference Board Consumer Confidence Survey in 2010, when 42 percent of survey respondents reported plans to delay retirement. Returning to the subject two years later, researchers have found a substantial — and surprising — spike in that number: In August 2012, the proportion of 45- to 60-year-olds expecting to run the “rat race” into their “golden years” had grown to 62 percent.
“It’s disconcerting that the two years in which the U.S. economy seemed to finally, if fitfully, turn the corner also left so many more workers compelled to change their retirement plans late in their careers,” said Gad Levanon, Director of Macroeconomic Research at The Conference Board and a co-author of the report. “This may benefit some businesses and industries, by reducing labor shortages and skill gaps as experienced workers stick around. At the same time, their delaying retirement can be a significant obstacle to the many companies seeking to cut costs. Mapping out the implications of the trend for individual firms and the economy as a whole means first understanding the drivers behind workers’ retirement decisions.”
Dark Times Leave Long Shadows
Trapped on the Worker Treadmill? finds that workers aged 45–60 who’ve experienced a job loss, salary cut, or significant decline in home price are much more likely to have plans for delaying retirement. The proportion of respondents reporting each of those three misfortunes rose between 2010 and 2012, but only enough to explain some of the dramatic overall growth in retirement postponement. In fact, the upward trend was apparent across all “impact categories” compared to 2010: Plans to delay retirement grew among those who’d lost a job, those who’d had their salary cut, and even those who’d not been significantly impacted by the recession. Likewise, across all regional, ethnic, gender, and income lines, more older workers are preparing to extend their daily grind.
A major factor in the growth of their numbers, finds the report, is the continued depletion of savings. The U.S. recession officially ended in July 2009 and the stock market has rebounded strongly since then. In 2012, however, 62 percent of 45- to 60-year-olds reported at least a 20 percent decline in the value of their financial assets since the start of the crisis — up from 42 percent in 2010.
“The cumulative effect of drawing down assets in hard times — including the loss of future gains during the recovery — helps explain the current plight of older workers,” said Ben Cheng, co-author of the report. “Even as economic conditions improve, many are still relying on assets to get by. And even those who’ve made it through the worst find themselves needing to work past retirement age to rebuild savings.”
Macro Effects and Long-Term Trends
Regression analysis reveals that roughly half of the 21-percentage-point increase in plans to delay retirement between 2010 and 2012 can be accounted for by the direct recessionary impacts of job loss, salary reduction, depressed home prices, and depleted savings. The remainder, according to the report, reflects larger and longer-term economic and sociological factors.
For instance, interest rates on savings accounts, C.D.s, government bonds, and other vehicles have fallen significantly since 2010. With low yields expected to continue into the foreseeable future, workers may be pushing back retirement in anticipation of smaller returns on their financial assets. Similarly, the generation-long shift from defined-benefit to defined-contribution retirement plans — alongside changes in Social Security and the increasing scarcity of post-retirement employee health benefits — may be incentivizing longer working years, as retirees shoulder more of the risk than in decades past. Finally, better health and life expectancy have, quite apart from the recession-related jump of recent years, pushed retirement age steadily higher since the 1990s. People expect to live longer and fuller past age 65 — and need more wealth to do so.