Delayed Retirement Here to Stay ; Even a Stock-Price Rebound Wouldn't Alter Trend, Driven by Shifts in Social Security, Pensions, and Broader Culture

Article excerpt

Summer is over. It's back to work.

Get used to working. Many of us - especially those age 50-plus - may be doing it longer than originally expected.

A slumping stock market is just one of the reasons. Changes in Social Security laws, stingier corporate pensions, and other economic and social factors mean many Americans will wait longer to retire and may have less gold in their golden years, experts say. Especially hard hit: those closest to retirement with the least time to rebuild nest eggs - or build them from scratch.

"Americans value retirement so highly they will certainly still retire," says John Rother, public-policy head for AARP, which lobbies for older Americans. "It is just that they may retire a little later with [a lower] standard of living than they had hoped."

There is already some evidence older Americans are staying on the job longer.

The portion of the population working or looking for work has fallen for those under 55. But labor force participation has risen in the past two years for people age 55 to 64, in part due to the aging of the population.

Also, "older Americans are sensing that their retirement nest eggs have evaporated and [they] need to work longer to rebuild" them, says Mark Zandi, chief economist at Economy.com.

The changing retirement picture is setting off both political and economic ripples. Widespread voter concern about retirement issues is one reason Congress is expected to take up pension reform before heading home for this fall's elections. And steps to strengthen retirement savings accounts are an element of a revised economic program President Bush is considering.

It is no surprise that the stock market's slump is a key factor in the changing retirement outlook. Between March 2000 and the end of 2001, some $5 trillion in stock market wealth evaporated, according to the Employee Benefit Research Institute (EBRI). Many workers saw their 401(k) plans and individual retirement accounts take major hits.

But the stock slide is only one factor reshaping retirement in the US. For many individuals, it is not the most important factor.

Why? Most Americans have only modest stock holdings. In fact, 4 in 10 people in the 55 to 64 year age bracket own no stock at all, according to the Federal Reserve. For those nearing retirement who do have stock, the median portfolio is just $47,000.

"The change in the stock market affected some people's plans to retire early," says David John, a research fellow at the Heritage Foundation, a conservative think tank. "But these were upper income workers, not a large portion of the work-force."

Shifting aspirations

Other experts argue that the drop in financial markets will speed up changes in retirement that were coming anyway. "Even if markets had not contracted, you would still see rebellion against the existing retirement model, because it is failing to provide [what] modern, healthy older adults are seeking," says Ken Dychtwald, an expert on retirement and author of "Age Power." He says older Americans "want to stay in the game even if with less time and less pressure."

One key factor that will push Americans toward later retirement is a change that takes effect in January in the Social Security program. The age for full retirement benefits has been 65 since the program began. But beginning with people who turn 65 next year (those born in 1938), the age at which full benefits can be collected will gradually increase, until it reaches 67 for people born after 1959.

Those born in 1938 or thereafter can still collect Social Security benefits as early as age 62. …