The benefits of working longer
According to the Wall Street Journal, the current financial stinkiness is prompting older workers to put off retirement:
"In a recent survey of more than 2,200 U.S. workers by consulting firm Watson Wyatt Worldwide, 44% of respondents age 50 or older said they plan to postpone retirement; half of those say they plan to work at least three years longer than previously expected."
That workers are postponing retirement is not a big surprise; that just 44% are planning on doing it is. My guess is, the other 56% haven't run their numbers. If they did, many of them -- at least the ones without a defined-benefit pension -- would also be planning on postponement.
The good news to this story: There used to be a lot of concern over the "brain drain" that would occur when all the baby boomers retired. Well, now many can't, so their brains will remain in the workforce.
That's the smart thing to do. In a previous issue of our Rule Your Retirement newsletter, we calculated the value of delaying retirement. A hypothetical retiree, assuming 7% investment return and a 10% savings rate (i.e., the amount of income socked away for retirement), a 66-year-old would see her/his/its retirement income increase 44% by delaying retirement until age 70. How? The combination of more investment growth (assuming it happens), more savings, and delaying Social Security can be very powerful, even given just a few more years.
Of course, this trend of delayed retirement has societal consquences: The more older workers stay on the job, the fewer younger workers will get hired, and the fewer opportunities for middle-aged workers to get promoted. But given longer life expectancies, I think an average retirement age of 70 (as opposed to the current average of 63 or so now) is more realistic.