The retirement outlook for employees age 50 and older is well, its pretty bleak. But the stock market collapse from last fall and earlier this year isnt all to blame. New research shows that near-retirees arent taking advantage of open opportunities to claw back their retirement savings, and instead are slumping their shoulders and resigning themselves to working longer.
New analysis from Mercer shows that since the end of 2007 through April 30, 2009, participants under age 30 have seen an average account balance gain of 24%, while those 55 and over have lost an average of 16%. Why do whippersnappers have an advantage?
The overall improvement in market conditions has certainly helped account balances to start heading in the right direction, but, near-retirees do not have time on their side, explains Eric Levy, business leader of Mercers retirement outsourcing business.
Based on our data, it is evident that these participants are not adjusting their portfolios as quickly to capture the recent market upswing as they were to move into more conservative investments in late 2008. When we compared the portfolio diversification of those 55 and over in April 2008 and 2009, capital preservation has gone from 30% to 39% of assets, compared to 22% for those under age 30.
Further, participants over age 55 have decreased their average pretax contribution rates from 9.2% in September 2008 to 8.8% in April 2009, and only 8% took advantage of catch-up contributions.
In other words, older workers are carrying 2008 market anxieties into 2009 and to their detriment.
And if near-retirees stay withdrawn in their shells for an extended period of time, the ability of those nearing retirement to adequately save has important ramifications, Levy says. En masse postponement of retirement for the vast baby-boom generation raises workforce planning issues that will have to be addressed sooner rather than later.
Pros, welcome to sooner. New stats from Watson Wyatt show that 44% of workers age 50 and older plan to delay their retirement, and 76% cite the decline in the value of their 401(k) as the main reason why. Of this group, 54% plan to work for at least three years longer than previously expected.
