Find a Job You Really Want In
For the many Americans who work to live and don’t love to work, retirement is their dream job.
Yet, for many baby boomers nearing retirement, it may seem further away than ever. While the stock markets were just hitting highs in February, by the middle of March that dream market turned into a nightmare.
Baby boomers preparing for retirement are suddenly in a predicament: Do they cash out when markets are in the pits and hope their savings will be adequate for their needs? Or do they grind out a few more years at work, dreaming of beaches and the freedom to live life on their own terms? Can they even stay in the workforce that long?
While many shush worries and argue the market will correct itself, to all the boomers stuck working 9-to-5, time isn’t exactly a soothing concept. Time is also a luxury many boomers simply don’t have. 48% of retirements happen unexpectedly due to health, caregiving needs, or layoffs.
We crunched the numbers to find out how this economic crisis may impact baby boomers’ retirement timeline or their financial health when they do retire.
Summary
- Boomers saving for retirement will need to postpone retirement 4 years to regain their savings
- Assuming a retirement age of 65, 4 years delay would require boomers to work until 69
- Those who were late to save and need to catch up ground will be pushed further behind
- Boomers who lose their jobs, receive paycuts, and are unable to continue contributing to retirement will be hit harder
It takes four years of savings for retirement savings of all incomes levels to exceed the amount they had February 2020. Three years puts them close, but not quite there. Increased contributions or lifestyle downsizing can move up this projection. However, there is no denying that retirees at every income level we examined will have to make some hard choices if they want to retire sooner.
How We Determined How Long The Coronavirus Will Put Off Boomers’ Retirement
To determine how the down market is impacting boomers retirement, we first determined how much boomers’ need to retire. It is recommended that boomers’ save enough to withdraw 70% of their prior income each year. Retirees with unpaid mortgages, young children, or big plans may need to save even more. We calculated how much is needed at varying income levels from $30,000 to $150,000.
We examined both a “lifetime expectancy” retirement and an “average retirement” length. An average life time is 18 years, while a “life expectancy” retirement assumes the retiree dies at or before the average life expectancy of 78– 5 years shorter than the average retirement. The model above depicts the shorter life expectancy retirement, but both recouped savings at roughly the same rate.
From there, we assumed a 20% drop in savings. To measure how quickly retirement accounts would grow, we assume participants continue to work and invest 10% of their pre-tax earnings, in addition to applying a modest 6% annual growth.
This model assumes boomers are on track to retire. Those who are further behind and were investing more aggressively to make up for late investments will be further behind and may have seen bigger percent losses. Those who lose their jobs or experience other financial hardships and are unable to contribute to retirement funds will also be hit harder than those who stay in the labor market and continue their investments.
All of our data assumes a retirement target of 65. Hopefully, older boomers already have robust retirement accounts and enjoying their dream retirements. If not, well, this will certainly delay delayed retirements longer.
Closing Thoughts On Boomers’ Delayed Retirements
Four years until full recovery might not seem significant if you’re 24 or even 44. However, for boomers nearing retirement, four years can be a long time.
Quite frankly, four years may be too long. Many seniors do not have the health or stamina to stay in the labor market until 79. Even seniors who do have good health, might find themselves unemployed or pushed out for reasons beyond their control. If working after 65 can be difficult, getting a new job after 65 is even harder.
What does this mean? Ultimately, it means more seniors may retire with less. Some will hope to recoup their investments after retirement. Others may just reduce costs and try and stretch their retirement funds as far as possible.
Author
Kathy is the head of content at Zippia with a knack for engaging audiences. Prior to joining Zippia, Kathy worked at Gateway Blend growing audiences across diverse brands. She graduated from Troy University with a degree in Social Science Education.
