When the parents of Julie Gray, a veterinarian in Las Cruces, N.M., retired, each of them could rely on company pensions as well as their own retirement accounts. At age 52, her situation is very different.
“I own my own business, so all I have is a 401(k), and my husband does have compensation from his employer, but they are constantly cutting those benefits,” she sighs. While her mother retired in her 50s, Gray says she and her husband expect to be working into their 70s. “I think it will take us a lot longer to accumulate the money we need to retire, plus I think we’ll need to compensate for inflation,” she says. “It’s just one of those things.”
Gray is a charter member of what could be called the anxious generation. In the latest Allstate/National Journal Heartland Monitor poll, Americans like Gray who are nearing the end of their work careers are much more uneasy about their prospects for retirement than those who have already stopped working.
Compared with today’s retirees, Americans who are over 50 but have not yet retired are substantially more stressed about their current financial circumstances; more skeptical of relying on the stock market to provide their income after they stop working; more concerned that the Great Recession and its aftermath will lastingly diminish their prospects; and much more worried that they will not enjoy as secure a retirement as their parents did. On average, near-retirees expect they will need to keep working as many as six years longer than today’s retirees did when they received the gold watch.
By comparison, today’s seniors, while not entirely sheltered from the economic storm, seem somewhat more buffered from it. On an array of measures, the poll found, the current generation of seniors is split almost in half between those who feel relatively secure and those who do not. Still, nearly four-fifths of today’s retirees are at least somewhat confident that they will have enough money to enjoy a stable retirement. And only about one in six expect their golden years to be less secure than that of their parents.
For those approaching retirement, the sense of security expressed by today’s seniors looks like a ship that is sailing beyond reach. Long past the generation of workers who could rely on guaranteed pensions, squeezed by faltering 401(k) returns, and strained by the financial costs of rearing children, many of the near-retirees fear they have not set aside enough money—and expect that failure may mean a more arduous and truncated retirement than earlier generations enjoyed. “I doubt I’ll ever retire,” says Bill Eason, a 57-year-old real estate appraiser in Livonia, Mich., who responded to the poll. “I don’t foresee that unless health issues come into play [and force me to stop working]. It’s just an issue of being able to keep up with expenses.”
The latest Allstate/National Journal Heartland Monitor poll is the 11th in a series exploring the ways that Americans are navigating the changing economy. The poll, conducted by Ed Reilly, Brent McGoldrick, and Jeremy Ruch of FTI Strategic Communications, a communications-strategy consulting firm, surveyed 1,200 adults by landline telephone and cell phone from Nov. 30 to Dec. 4, including an oversample of 200 interviews among adults age 50 and older. It has a margin of error of plus or minus 2.8 percentage points; the margin of error for near-retirees and current retirees is larger, almost 6 percentage points. This survey focused on Americans’ expectations of—and experiences in—retirement.
Today’s retirees, and those nearing the end of their working lives, both describe retirement in similar terms. In an open-ended question, about half of each group defined retirement as not having to work, with the next largest group terming it a time to relax with fewer responsibilities.
More than four-fifths of each group expressed at least some confidence in their ability to make financial decisions relating to their post-working years (as did the rest of the population). Both groups converged around the same priorities when asked what individuals could do to best prepare for retirement; each placed at the top of the list contributing to a retirement plan, and saving and paying off debts (working longer or paying off a mortgage ranked lower). Both groups came together as well in declaring that they would most trust advice on retirement from friends and family members, part of a long-standing trend toward sometimes reluctant self-reliance in earlier Heartland Monitor polls. Only 16 percent of those in retirement, and 13 percent of those near it, expressed a “great deal” of trust in financial institutions to help them make such decisions.
The two groups also substantially overlap in describing their greatest concerns about retirement. Roughly one-third of current and near-retirees say they worry most about either outliving their money or becoming unable to afford basic expenses; about one in eight in each case worry most about becoming a financial burden on others. Only one in 12 in each group are most concerned about becoming bored. The sharpest difference: More near-retirees than retirees say that their greatest fear is becoming unable to afford health care.
The two groups diverged somewhat more when asked what they most enjoy, or expect to most enjoy, about retirement. Those already in retirement picked spending more time with family and friends (44 percent), followed by having more time to pursue hobbies (17 percent). Only 9 percent stressed having more time to travel. “I’ve seen about all I want to see,” said Bob, a retired 71-year-old truck driver in eastern Iowa who would not give his last name. Perhaps not surprisingly, those nearing retirement split more evenly between those three options, with many more of them stressing travel (21 percent) than today’s seniors.
The more important differences emerged in the two groups’ contrasting descriptions of their economic circumstances—and their diverging expectations for what will come next. Plenty of seniors report that they are facing economic strain amid the sustained slowdown. But the anxiety is considerably greater among those approaching the end of their working years.
In describing their current circumstances, 9 percent of current retirees rate their immediate financial situation as excellent and 40 percent as good; an almost equal number describe their position as only fair (38 percent) or poor (11 percent).
On a separate question, just one in six retirees say they find it hard to make ends meet every month. Nearly another third say they can give live comfortably and save an adequate amount. The largest group (almost half) says it can get by each month, but without enough of a cushion to sock anything anyway. Suzanne Fortescue, 64, who retired four years ago as a teacher in suburban Detroit, is typical of that latter group. “For us, we never did any investing because we never had anything to invest,” she says. “We just invested in our sons and their college [educations], which we are still doing. That’s all we could ever really do.”
Class divisions loom large on both of these questions. About three-fifths of retirees with at least a four-year college degree describe their current financial situation as excellent or good, while 55 percent of those without one say that it is only fair or poor. About two-fifths of college-educated retirees say they live comfortably, compared with only about one-fourth of those without degrees. Dividing retirees with incomes above and below $75,000 produces comparable results.
When retirees were asked about their health care costs, a similar split surfaced. Again, almost half of them (48 percent) said they had little concern about their ability to pay medical expenses; but the other half said that they considered such expenses “somewhat worrisome” if manageable (35 percent) or “very worrisome” (15 percent).
Jeff Koon, a 69-year-old retired survey researcher in St. Paul, Minn., who is still working part-time, is among the satisfied seniors. He’s receiving a pension and benefiting from the proceeds passed down when his parents sold their house at a tidy profit upon their own retirement. His wife is still teaching at a small private college. “With a pension and the stuff passed to us by our parents, we should be OK,” he says.
Mary Ward is in a much more vulnerable position. At 66, she is retired in Denver City, Texas, and subsisting on Social Security after the family’s savings were consumed paying for illnesses that ultimately claimed her husband. “Everything that we’ve had, we ended up spending just trying to survive,” she says. “We basically lived off Social Security, disability. But the groceries have gone up, the utilities have gone up, doctors’ office visits. It’s just a lot harder.”
On other measures, though, most of today’s retirees express more-modest levels of strain. Only one in nine say they are still working (almost all of them in part-time positions that they assumed after retiring from their full-time jobs), and only about one-fourth of those by necessity, rather than choice. (That means that fewer than one-in-30 retirees are working for necessity.) Fewer than one in 20 say they are receiving financial support from their children (although, tellingly, nearly one-third say they are providing support).
Despite all the turmoil in the financial and housing markets in recent years, relatively few seniors say that the bad economy has disrupted their plans for retirement. Just 8 percent of today’s retirees said they retired later than they expected; another 43 percent said they retired about the time they expected; and 47 percent said they turned in their time card even sooner than they had anticipated.
“It’s a matter of keeping up with current obligations, which makes our saving and socking away more difficult. So that sort of extends the working life.” —Ross Cerny, 60, West Los Angeles
Nor did many say they had run into difficulties selling their house for retirement, largely because only about one-fifth of retirees attempted to do so. Overall, only 8 percent of today’s retirees said they had sold their house for less than they expected, while 4 percent said they had been unable to sell their house at all. Nearly three-fourths of retirees say they are still living in their own homes; about one in six say they are living independently but in a community for seniors. Just 7 percent say they are living with relatives, and only 2 percent report that they are now in an assisted-living facility.
Putting all these pieces together, just under half of seniors (48 percent) say they have about as much income as they expected in retirement; another 16 percent say they have more. But a substantial 35 percent say they are trying to get by with less income than they anticipated. Don Shaw, a 76-year-old former dairy worker in Indianapolis, is one of those worried that he is outliving his financial resources. “Things are a little rough right now,” he says. “It’s getting harder and harder to pay our bills. Our insurance, hospital insurance, hospital fees, bank fees—everything goes up. Social Security will increase some, but that’s just a dab. I went through all my investments, all my retirement savings. It’s gotten bad, bad, bad.”
Again, the class divide looms large on this question: About two-fifths of retirees without college degrees said they have less income than they anticipated, compared with only about one-fourth of those with degrees.
When those who said their finances were tighter than they expected were asked why, they divided closely between reasons related to their expenses (a combined 30 percent said either that their basic expenses or health care costs had increased) and their income (16 percent said they had lost a job, 11 percent said their investments had declined, and another 5 percent said they could not save enough).
The fragmented experience of today’s retirees resurfaced on a final question that asked whether they expected to maintain enough income to guarantee a secure retirement. One-third said they had a great deal of confidence they would maintain that level of income, while one-fifth doubted they would have enough to enjoy security. Once again, the largest group hedged: 46 percent said they had some confidence that their finances will provide them security. In follow-up interviews, it was clear that for many retirees financial anxiety is a kind of dull ache that never entirely eases, even if the hard times are a ways off. “I was in manufacturing all of my life, and I wanted a less stressful lifestyle,” says David Reidinger, 70, who worked in materials management and is retired in Middletown, Conn. “But instead of worrying about the job every day, meeting payroll, and getting jobs out the door, it’s a constant worry about the money factor now.”
ON THE BRINK
For all of those fears confronting retirees, the survey captures a palpably greater degree of anxiety among those nearing the end of their work lives—families that have been exposed more directly than those already in retirement to the gales battering the job, housing, and stock markets. In more ways than one, Americans about to leave the workforce feel like they’re on the brink.
On the most basic questions of immediate well-being, Americans 50 or older who have not retired expressed less satisfaction than current retirees. Just 41 percent of those near-retirees (compared with 50 percent of retirees) describe their current finances as excellent or good; 58 percent (compared with 49 percent of retirees) say that their finances are only fair or poor. In this group, too, the class divide is gaping. While half of near-retirees with college degrees describe their financial situation in positive terms, only one-third of those without degrees agree.
Looking forward, the two groups diverge as well. Over two-fifths of current retirees expect to enjoy a more secure retirement than their parents did; only about one in six expect their retirement to be less secure. (The rest anticipate a similar level of security or don’t know.) Expectations among the near-retirees are much more pessimistic. Nearly half of them expect a less secure retirement than their parents enjoyed. Only about one-fourth believe their retirement will be more secure. (On this question, intriguingly, the class divide disintegrates: Near-retirees with college degrees are more likely than those without one to say they expect a less secure retirement than their parents had.) The results were similar when poll respondents were asked whether they expected their retirement to be more comfortable than that of their parents. Half of today’s retirees said yes. Only one-fourth of those near retirement agreed.
The contrasting expectations of today’s retirees and near-retirees haven’t produced significantly different political attitudes. Almost three-fourths of retirees and near-retirees agree that the country is on the wrong track; that President Obama doesn’t deserve reelection (only about two-fifths of each group say he should be); and that Congress shouldn’t convert Medicare into a voucher-like system, as Republicans propose (more than three-fifths of each group say no).
But the effects of strained earnings and tanking investments are written in the near-retirees’ gloomy assessments of what their post-working years will look like. Although nearly half of today’s retirees said they had retired earlier than their parents did, fully half of those nearing retirement expect to stop working later than their parents did. More than two-fifths of near-retirees now believe they will remain in the workforce longer than they anticipated when they were younger. On average, those near retirement expect to work until 66; most of today’s retirees reported stepping down at 60. And while only one in nine retirees say they are still working, two-thirds of those nearing retirement expect to work at least somewhat after they step down from full-time employment. Nearly half of those near-retirees say they anticipate having to work out of necessity, not desire.
Eason, the Livonia real-estate appraiser, is among those worrying about what lies ahead. “Back in the old days, people had pensions coming, and they knew … they had Social Security waiting,” he says. “And now large businesses are just removing pension funds. I think, personally, it’s criminal. And all the other cuts—you put all this together in a shaker glass and what’s coming out? Not much.”
Eason acknowledges that he has been unable to do much to prepare for retirement. While his wife is contributing to a 401(k) account at her job, he has not been able to put aside much because he owns his own business as an appraiser, “and unfortunately in the last few years I haven’t been working much.” And, of course, the stock market’s decline since 2007 has buffeted his wife’s 401(k)—and he fears it will be years, maybe even decades, before it recoups the losses. As for the family home, its worth has plummeted well below the cost of their mortgage, and Eason expects a long wait there too before the losses are reversed. “Because I’m a real-estate appraiser by trade,” he says, “I watch the market in my local neighborhood. The house I live in cost $147,000, and … other houses [built in the same year by the same builder] are selling for around $75,000. So at that rate, it’ll take the rest of my life for the market to catch up and equalize.”
As Eason’s comments suggest, one big difference between today’s retirees and future generations is the availability of employer-provided pensions. Almost half of today’s retirees report receiving a monthly pension as a “major source of income”; however, only 37 percent of near-retirees say they expect to. By contrast, the share of near-retirees who expect to receive significant income from a 401(k) plan (39 percent) or an individual retirement account (27 percent) is much larger than among current retirees (16 percent and 18 percent, respectively.) About two-thirds of current retirees and three-fifths of near-retirees expect Social Security to be a major source of their income. “I trust that Social Security will be there,” says Ross Cerny, 60, a mediator in West Los Angeles, “but its levels are pretty modest.”
These results reflect the overwhelming shift of employers over the past generation away from defined-benefit pension plans toward defined-contribution plans that guarantee workers fixed sums to invest during their work lives and not fixed payments in retirement. Although respondents from all age groups expressed confidence in their ability to make financial decisions, the shift toward reliance on 401(k) plans generated a clear note of anxiety among those nearing retirement.
In that group, 46 percent agreed that “given the recent ups and downs in the economy and the stock market, it is too risky for people to rely primarily on the success of their personal investments to pay for their retirement”; another 43 percent took the opposite view that “people are still better off relying on their own investments … rather than depending on pension programs from employers or government.” Both seniors and younger workers expressed more comfort with the 401(k) system. For older workers nearing retirement, the market’s decline may have been especially traumatic because it came just as many of them had hoped to begin cashing in on their investments. “It leaves a little too much to chance,” says Lois Hardrabe, a 53-year-old homemaker in Salem, Va. “Not too long ago, some of our money just disappeared in the 401(k). It was just gone. But, really, it’s the only thing we got to go on right now.”
Although declining 401(k) balances are a worry for some, in follow-up interviews with near-retirees, by far the larger concern was the inability to get far enough ahead of the monthly bills even to invest for retirement. Only about one-fifth of the near-retirees say they can live comfortably and put aside money to save (compared with the nearly one-third of retirees). “It’s a matter of keeping up with current obligations, which makes our saving and socking away more difficult,” Cerny says. “So that sort of extends the working life.” Robert Gagnon, a mechanic in Livermore, Maine, voiced a similar frustration. “I have a lot of confidence in my [financial] abilities…. But it’s still difficult to work and make monthly payments for everything, home and insurance, and still pay for college [for the kids] and then save for retirement on top of that,” he says. “I’m not saying I don’t save for retirement, but I’m saying that it should be more. But I’m just paying other expenses that are pretty high.”
Caught directly in the path of this storm, the near-retirees are somewhat more likely than today’s retirees to say they expect the Great Recession and its aftermath to lastingly harm their prospects. The most revealing measure of their anxiety, however, is that only one-fifth of the near-retirees (compared with one-third of those who have retired) express a great deal of confidence that they will have enough income to provide a secure retirement. Like Eason, many of them are paddling so hard to stay above the waves today that they have difficulty imagining a time when they can confidently lay down their oars.
Scott Bland contributed contributed to this article.
This article appears in the December 17, 2011 edition of National Journal Magazine.