Surveys Show 60% Of Boomers Want To Delay Retirement Because Of COVID-19: Can They?

Despite rumors older people maybe skittish about working and being out in the world before they can get the COVID-19 vaccine, planning to work longer in old age is on the rise. It makes sense to want to work longer. Losing your job before you are planning to retire can increase the risk of retiree-poverty for even high and middle-income employees.

A November poll from financial app Simply-Wise reported 19% of people in their 50s plan to work full-time in retirement (only 8% were planning to work in retirement in May 2020). And this month Voya Financial’s  survey revealed 59% of working boomers plan to work in retirement as a result of the pandemic. I am guessing only an American doesn’t blink at that phrase— “work full time in retirement.” On its face, the statement is oxymoronic. Working isn’t retirement.

A 2019 Employee Benefits Institute survey exposes the gap between hope and reality. In 2019, 34% of older workers said they expect to retire at age 70, though only 6% of retirees retired at 70 or higher. Just 13% of workers said they plan to retire before 60, but 38% of actual retirees were either pushed or pulled out of the labor force before age 60. 

Even in the best of times most retirees say they are pushed out of the labor force (or pulled out be health or a spouses’ health) before they planned. Alicia Munnell and colleague’s Boston College’s Center for Retirement Research deep dive into earlier-than-planned retirements found that being unemployed is one of the biggest hazards to being forced out of the labor force too early.

Americans aren’t delusional or stupid when the hope to work in “retirement” is larger than the probability.

Older Americans do fall back on work to supplement feeble retirement savings. English sociologist David Lain compares American elders to the English and found, in 2008, 66% of Americans 65-74 years old said they would like to stop work but they need the money whereas only 32% of their English counterparts said they were working because they could not afford to retire or were

And, In Fact, Older Workers Do Not Have Enough Retirement Wealth

Low-earning older workers (under $50,00 per year) when pushed out of the labor force too early tend to withdraw what little they have saved for retirement (63% have nothing saved and the average among those with any savings is just $42,000). Hoping to work longer is seen as the only choice to conserve the cash and stave off poverty in retirement. Only 59% of middle earners (households earning about $70,000) have retirement savings; the average is $101,000. Since the average person needs at least 8 times their annual salary in their 60s to retire and maintain their pre-retirement standard of living in retirement, middle earners don’t have enough.

Even before the COVID-19 recession, even high-earning households were unlikely to maintain their living standards in retirement. Over one out of 4 — 27% — high earners—earnings above $137,700—do not have any retirement savings and the average is about $250,000 for those who do.

Believing You Can Work Longer is Oddly Comfortable

There is a very good human reason to expect to work longer, despite the low odds. That reason is called “cognitive dissonance,” which is one of the most powerful concepts in behavioral finance. When two pieces of information or beliefs are inconsistent, individuals can experience extreme discomfort at the conflict (also called dissonance).

Many are facing situations ripe for cognitive dissonance. Financial preparedness for retirement was bad for all income classes before the pandemic. Writer Mark Miller and other research shows unemployment and the recession are hitting older workers especially hard. And high levels of elder unemployment will sure to linger even after the disease and employers will be writing the rules on labor conditions.

The two beliefs paired together — “I am in my late 50s and I don’t have enough to retire on” —- are very disturbing.

It is natural for an individual – especially if they are alone and no-one with power cares — to reduce the dissonance and discomfort by merely changing one or the other beliefs. Changing one’s belief and ignoring reality to believe “Hey, I will keep on working,” is a big relief and a temporarily soothing.

We need a sea-change in America’s retirement system. The Biden administration can do a lot to help older worker and retirees including forming an Older Worker’s Bureau.

Without bold national reform, the recent rising expectations of older workers to work longer are little more than understandable, but sad, hopes. And hope is not a plan.