Susan Ferre and her husband Charley Lang sold their home in Texas and moved to Berlin, New Hampshire in 2008.
“Just at the crash [haha]… that was the year that we moved up. One of those momentous decisions with our house selling for half of what we thought it would sell for because the market was just plummeting where we were.”
Ferre says they were hemorrhaging assets when they moved. They originally wanted to retire on the New Hampshire seacoast but they sold their antique sail boat at a nominal fee. And after the dust had settled, Lang says his 401k had lost about a third of his savings.
“So we’d been putting money in but I was not being very careful because I had trusted the money houses to manage that for me. And now I’m much more skeptical at how things work in Wall Street.”
Lang is 69 and now works as a doctor for Coos County. And Ferre is 68. She’s director of a nonprofit that puts on a Bach concert in the North Country each year. Ferre only makes about $10,000 a year, so they rely primarily on Lang’s medical salary.
“We had expected not to worry as much about where funds were coming from… So that was a big reality check, shall we say, but it has brought us to a new life that we didn’t anticipate.”
RG: “Boomers were bright-eyed about their future. Nowhere but up from here. Can’t wait to retire. Then they were going to travel the world with their friends and family and have that second or third vacation home. But the Great Recession turns out was a great awakening.”
Ross Gott is President of the financial planning firm ZeroCelsius Wealth Studio in New London. He says he often advises clients to hold off on retiring because their savings won’t sustain their lifestyle. Before the recession, they would tend to resist his advice. But now, Gott says they get it.
“You know, we have to let them know exactly where they’re at and they’re not going to make it. Social Security is not going to cover it. Drawing down on a 401k or a 403b plan prior to hitting full retirement age can really disable you financially.”
Gott says sometimes just working and saving for only a couple more years, while practicing the post-retirement budget is enough to make up for inadequate savings. But there are still plenty who will have to keep working.
“Something like 70% of employees are expecting to work in some fashion during retirement. That’s gonna have to be one of the ways they provide for themselves. How long they’re gonna be able to keep that up is an unknown.”
Between 2001 and 2008, about 16% of retirement age people in New Hampshire were working. But in 2009, that number increased by 5%. It’s remained about 21% each year since.
Tony Carnevale is the Director of the Georgetown University Center on Education and the Workforce.
“Since 2007, the lion’s share of the increase in people holding off on retirement has surely come from the recession. That is, they’re not retiring because they don’t have enough money in the bank. They have to hang on, in many cases, for some years before they accrue enough to retire.”
But that’s not the only factor at work here, says Carnevale. Life expectancy has increased and, with that, he says one can see a longer trend of retirement age people choosing to work even longer. But what about the younger generations? With all these baby boomers delaying retirement, does that make it harder for others to find work?
“Well that story’s going around but there’s really nothing to it. The opposite is true. The longer people work, the more money they make and the more money they spend, the more jobs they create for others.”
Carnevale says the economic outlook is actually pretty good for employment.
“What is unique in the next 15 to 20 years is that the baby boom will retire and the biggest generation in American history will create 33 million job openings for other workers as they retire… even as they’re retiring later and later.”
And, he says, if the U.S. economy keeps growing at a rate of 2%, we’ll see another 52 million jobs created over the next decade.
For young people—those who will likely fill those baby boomer jobs—financial advisor Ross Gott says they should learn how to budget and save early.
RL: “Any free advice for a 28-year-old?”
RG: “28-year-olds save now! Give you a quick savings example: Individuals start saving just $5,000 a year for ten years between the ages of 25 and 35. So they saved a total of $50,000, right, during that period of time. If that’s all they ever did. All they ever saved. That $50,000 would’ve grown to $850,000 at 8% returns by the time they hit 65.”
$850,000 if all goes well, but even if your faith in the markets is shaken, Gott says compound interest is still the most powerful force in the universe.
Correction: 2:18 p.m.
The above figure was corrected to say that 16% of retirement age people were working.