A recent article in The Ledger, a Lakeland, Fla., newspaper, profiled an 88-year-old man who went back to work three years ago after spending more than 20 years in retirement. George DeMarco took a clerical job earning $7.67 an hour to keep from losing his home and to help make ends meet. He cited the rising cost of living and higher gas prices as reasons why his $1,200 monthly retirement income "just wouldn't cut it."
The article cites data from the Bureau of Labor Statistics: "The number of employed people 65 and older rose from 4.3 million in 2002 to 7.2 million this year. The number of working seniors 75 and older is now 1.3 million, up 41.2 percent from a decade ago."
Do you think young people are oblivious to this phenomenon? No, they're not. They're competing with these older workers for jobs.
Cleaving to the teat of retirement security
And young people are adopting some old-timey values. A report released this week by global consultants Towers Watson reveals that young people younger than 40 are increasingly attracted to working for companies that offer a defined benefit plan. Those are the traditional pension plans of yesteryear that many of their grandparents enjoy today.
The percentage of young workers who said a defined benefit retirement plan played an important part in their acceptance of a job more than doubled between 2009 and 2011, from 28 percent to 63 percent. And 7 out of 10 (72 percent) said their company's retirement program is an important reason for staying with their employer, compared to just 37 percent in 2009. Three out of 4 (74 percent) young workers would like to continue working at their jobs until they retire because of their pension benefits. But only 44 percent of those younger than 40 felt that way in 2009.
Imagine sticking with a job for decades for the reward of a regular paycheck in retirement.
Meanwhile, young people don't feel quite as loyal to employers that only offer a defined contribution plan such as a 401(k) plan. Only 28 percent said it was a factor in accepting a job in 2011, up just 9 percentage points from 19 percent in 2009.
This survey was taken among employees working for large companies with at least 1,000 employees.
Defined benefit plans are a dying breed, and even though they help companies retain employees, it's highly unlikely they'll make a big comeback. That means for most of the rank and file, the only way to get retirement security is to create it yourselves. The earlier you get started, the more likely you can achieve it. And the best way to do it is by making contributions to a 401(k) plan or whatever retirement plan you can access.
Think of it as a freedom plan
Look at it this way: With a standard 401(k) plan, you're not locked into working for one employer for your entire life. You have the freedom to move around, and your vested retirement benefits are portable as well. While it may be tougher to ensure retirement security with these plans, it's quite possible, especially if you get started early and you contribute faithfully.
This week, the Center for Retirement Research at Boston College released a study called "How can employers encourage young workers to save for retirement?" The problem: Retirement is a long-term goal that many young people can't relate to. The analysis shows that young people younger than 35 respond the best to concrete ads that give a specific short-term savings goal such as saving $312.50 biweekly.
After reading the brief, I got the impression that most of the ads were pretty effective in getting young people to think about retirement planning.
Message to young folks: If a pension plan isn't an option, make a commitment to contribute faithfully to a workplace plan or individual retirement account. That way, you can enjoy freedom throughout your career, and it's less likely you'll be looking for work in your 80s.
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