Americans plan to work through retirement

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Forget about a leisurely retirement of golfing and cruising around the world. The retirement of tomorrow will be all about working.

At least that’s what three-quarters of American workers expect, according to Bankrate’s most recent Financial Literacy poll. Bankrate commissioned Princeton Survey Research Associates International to ask both retirees and workers questions about retirement realities and expectations.

As depressing as the thought of working in perpetuity may be to the lazier workers among us, work is a powerful factor in our identity and well-being. So of the 75 percent who expect to work for as long as they can, 39 percent say it’s because they like to work. One-third (32 percent) say it’s because they’ll need the money. A few say they’ll work for both reasons.

Interestingly, only 15 percent of today’s retirees actually work to supplement their income.

Radon Stancil, a Certified Financial Planner at Diversified Estate Services in Raleigh, N.C., says workers’ expectations may not jibe with reality.

Which option best describes your plans to work during retirement?

“I don’t know if that is just youth talking and not feeling what it’s like to be 65 or 70 and having to work,” he says.

“Also, it’s much more difficult for people who are already retired to actually go back to work. For instance, if you retired when you were 62 or 65 but the downturn created a situation where you feel like you need to go back to work, the problem is: What do you do for work?”

Education a factor

Working forever might be the only option for Americans if the situation of many current retirees is any indication.

One-quarter (26 percent) of retirees depend on Social Security as their only source of income.

Education plays a role in how much money retirees have. Among those with a high school education or less, 37 percent have no other income sources than Social Security. Meanwhile, just 6 percent of retirees with a college degree or higher rely solely on Social Security.

Unfortunately, young people are not entirely on board with saving for retirement. Almost 30 percent of Americans surveyed between the ages of 18 and 29 report that they do not invest in a retirement plan.

“Young people need to get educated on savings or they’re going to be part of the 26 percent living on Social Security. The more educated people are, the more likely it will be that they are not going to be dependent on Social Security,” says Mark LaSpisa, a Certified Financial Planner at Vermillion Financial Advisors in South Barrington, Ill.

Worry in retirement

The majority of today’s retirees worry about money, a situation compounded by the volatility in the stock market. More than half (55 percent) worry about it and wish they’d saved more. Thirty-eight percent say they’ve saved enough and don’t worry a whit.

Do you worry about money and wish you saved more, or did you save enough?

But worry is a transient problem, says LaSpisa. “Worry is relative to what is going on currently,” he says.

And the market movements over the last year have been rough for people counting on their retirement portfolios for the next 10, 20 or 30 years.

“There are two big fears. One is that they’re going to get sick in retirement and lose their assets paying for medical or long-term care stay. The second is that they will stay very healthy and outlive their money,” says LaSpisa.

Nearly four out of 10 (37 percent) retirees say they fear outliving their money. But six out of 10 (59 percent) aren’t all that concerned.

Even the biggest worriers may just shrug when it comes to worrying about possibilities that far down the line. “People are typically more concerned about the fear facing them now rather than the fear facing them 15 or 20 years down the road,” says LaSpisa.

More women than men worry, however: 44 percent of women versus 28 percent of men.

This might be due to male bravado or the fact that statistically it’s likely to be the women who stick around the longest, says Conrad Ciccotello, director of the personal financial planning program at Georgia State University’s Robinson College of Business.

“Demographically 12 out of 13 widowed people are women. While this confident man might be sure everything is going to work out, 12 times out of 13 he dies first. So you’re left with the woman saying, ‘Well, what do I do?'” he says.

Stancil expressed surprise that more people aren’t worried about running out of money in general.

“The majority of people we talk to, that is the No. 1 thing to worry about. And it doesn’t matter the size of assets. They could have $5 million saved up and everything paid for and living on $40,000 a year, and they’re still worried about running out of money,” he says.

Impact of the downturn

Diminishing savings is a real concern for many, especially since the recent downturn affected more than just stock portfolios. For instance, many people were counting on the value of their homes to buoy their finances through retirement.

How worried are you that you might outlive your money?

When asked if their withdrawal habits have changed or remained constant as a result of the financial crisis, about a quarter, or 24 percent, of retirees responded they are in fact now withdrawing more money from their savings than they had been previously.

Just 19 percent say they’re withdrawing less, while 53 percent have not changed their withdrawal amounts.

For those in the 50-to-64 age group, 30 percent reported they are withdrawing more now from their savings. That can be a bad omen for retirees who may have decades of life left to fund.

It surprised Mary Ellen McCarthy, registered investment adviser and founder of Responsible Investing in Brookline, Mass.

“If the withdrawals are from cash savings, that’s fine and is certainly better than increasing borrowing. But it can be very, very damaging to long-term financial safety to increase withdrawals from stock portfolios that have already been hurt by the (recent) crash,” she says.

“Stock portfolios hit simultaneously with both a market crash and increased withdrawals will probably never come close to recovering. Smart retirees, or those getting close to retirement, should carry a significant cash cushion so that they can avoid being forced to liquidate stocks or bonds at just the wrong moment,” she says.

For nonretired workers, the financial crisis knocked a bit of wind out of their retirement sails. Only 31 percent of workers plan to retire on their original schedule.

How has the financial crisis affected your retirement plans? Do you expect to retire:

A third say that their retirement date will likely be knocked back between one and 10 years. Seven percent say they’ve been thrown off track by 10 years or more.

And 18 percent believe they will never be able to retire — nearly exactly what the poll found two years ago in the April 2007 retirement attitudes poll.

Effect on investing strategies

Though their retirement plans may have changed due to stock market volatility, investing strategies have mostly stayed the same for most people.

A majority, or 53 percent, of those surveyed say that they have kept their investments about the same despite the market turbulence. Only 5 percent say they sold all or most of their equity positions or equity mutual funds.

Few people had the mettle to get aggressive during the market free fall. Just 3 percent say they bought more stock or stock mutual funds. But 9 percent put more money in conservative fixed-income products such as bonds, CDs or Treasuries.

“For the people who say they haven’t changed their investing strategy, I would say ‘kudos,'” says LaSpisa.

“But, part of the reason is that they don’t pay much attention to it. If only I had a nickel for every client who walks into my office and says, ‘I stopped opening my statements because I don’t want to see them,'” he says.

Investing can be an overwhelming process for the average investor and most people are on their own for their retirement planning.

Only 27 percent of nonretirees surveyed work with a financial adviser and depend on them to make their financial decisions.

“Let’s hope they know how to monitor that adviser and communicate effectively with him or her — and that the Bernie Madoffs of the world are the exception,” McCarthy says.

Start saving now

In 2008, only the most conservative investors managed to avoid the carnage of the market crash: conservative investors and people who squirrel away their savings under the mattress.

In general, there’s no escaping market volatility for most people hoping to fund a couple of decades of retirement, but consistently saving will get most investors there.

One thing is certain: Only a few retirees wish they had spent more money during their working years rather than save for retirement.

Just 12 percent of retirees said they regret not spending more money when they were younger. But 83 percent have no such regrets.

Results are based on telephone interviews with a nationally representative sample of 1,003 adults, age 18 and over. The interviews were conducted from Sept. 17 through Sept. 20, 2009, under the direction of Princeton Survey Research Associates International. Interviews were conducted on both landline and cell phones using random digit dial (RDD) sample. Sample demographics were weighted to match population parameters derived from the Census Bureaus’ 2007 Annual Social and Economic Supplement data. The overall margin of sampling error is plus or minus 4 percentage points for results based on the total sample. Results based on 328 retirees have a margin of error of plus or minus 6; results based on 639 nonretirees have a margin of error of plus or minus 5. Results based on smaller subgroups are subject to larger margins of sampling error. In addition to sampling error, the practical difficulties of conducting surveys can also introduce error or bias to poll results. For full results and methodology, download this PDF.