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Sunday, February 8, 2004
 
Nearly there

Retirement out of reach for many

By Cynthia Flash
Special to The Seattle Times

While many people work their whole lives and sock away money so they can retire, many these days find that is not possible. They've watched their retirement savings drop with the stock market. The pension they counted on from their employers is less than expected. Or their expenses — housing, medicine, taking care of another family member — are way too high.

"I don't think people realize how daunting a task that is to retire at age 60 and have money last until their 90s," said Mark Janci, a financial planner with Network Planning Advisor in Bellevue.

Some — like the Hastings family in the accompanying story — simply don't plan.

Despite an increased emphasis on retirement savings through employee 401(k) plans, Individual Retirement Accounts (IRAs) and other self-funded retirement plans, the average worker is not accumulating enough to retire on. Result: Many are having to work past normal retirement age.

The average worker in 2002 had $39,885 in his 401(k) plan, according to the Employee Benefit Research Institute and the Investment Company Institute.

Older workers, not surprisingly, had more than younger ones:

• Average workers in their 40s: $61,033

• In their 50s: $88,332

• In their 60s: $106,689.

Unfortunately, that isn't nearly enough to retire on. Consider:

Someone who needs $40,000 to live on and receives $24,000 each year from Social Security (or $2,000 a month) will still need to earn an additional $16,000 a year.

To earn that $16,000 from investment income, he'd need a $400,000 portfolio that earns 4 to 5 percent a year.

Needless to say, your average workers' $106,000 retirement savings isn't going to cut it.

It's off to work we go

The only other way to make up the difference is by getting a job. These days, that's what more people of retirement age are doing.

More seniors are becoming self-employed, and, the flip side: Of those self-employed, the biggest chunk are seniors:

• From 1994 to October 2003, the number of self-employed Americans 55 years and older went from 2.5 million to 3 million — an increase of 20 percent.

• According to outplacement firm Challenger, Gray & Christmas, senior entrepreneurs now represent 28.5 percent of all self-employed workers — the highest percentage among all age categories.

Stock-market losses that shrank retirement funds are believed to be the major catalyst.

Meanwhile, surveys show 45 percent of older working adults say they plan to continue working to age 70 or beyond.

The Medicare bite

Cranking up the pressure, Medicare premiums continue to take a bigger chunk out of the Social Security benefits that many retirees count on, while the government continues to make changes in Medicare coverage that may end up costing many retirees even more.

 Working retired

Thumbnail  Thumbnail
Chuck Hastings has to work  Madaline Irvine wants to work


By the numbers

Who's on the job?

According to 2003 national surveys and interviews by AARP, formerly known as the American Association of Retired Persons:

Never retired from a job: 85 percent of people ages 50 to 70; an additional 15 percent said the did retire from a job but are working now.

Plan to work beyond retirement age: 70 percent of those not yet retired; almost half said they'd work into their 70s or beyond.

Plan to work at least part time beyond retirement age: 63 percent of pre-retirees; an additional 5 percent say they never expect to retire.

In a 2002 survey of investors 50 to 70:

Delayed by stock market: 21 percent of those who hadn't retired said they postponed retirement as a result of stock-market losses.

A different outlook

"The New Retirementality: Planning Your Life and Living Your Dreams ... at Any Age You Want," by Mitch Anthony, Dearborn Trade Publishing, $16.95. The financial and life planner's cleverly named concept should be of interest to anyone uneasy with the traditional requirement that Americans totally drop one portion of their lives — the working part — simply because they've reached a certain age.

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