"One solution is likely to be more post-retirement work as more retirees seek a so-called bridge job in early retirement," said Mr. Wyss. "Unfortunately, health and labor market conditions often prevent even those who intend to work from doing so. In addition, in a weakening economy, bridge jobs could be harder to find," he added.
Moreover, only 37% of Baby Boomers who are about to enter into the post-employment world have a traditional pension coming from their employer. That's down from 60% in 1983.
In addition, the shift to defined-contribution pensions - the most common types of which are 401(k)s, IRAs, and 403(b)s - from traditional defined-benefit ones has had mixed results. On the plus side, the percentage of households with no pension coverage has declined slightly, to 34% from 37% in 1983. However, in 2004, the median 401(k) plan for people in the 55 to 64 age group was worth only US$60,000 - not enough to provide for much of a retirement. (In 2006, the average 401k balance for people in their 60s was $157,727.)
Mr. Wyss explained that the other problem for the near-retired is the poor performance of the asset markets in recent years. The S&P 500 will have its worst decade since the Depression if it closes below 1469 at year-end 2009. "Retiring in a period like such as this strains assets in the best case, and this is far from the best case," noted Mr. Wyss.
"Asset values have been declining, while saving rates have hovered near 0%, and if older workers aren't adding to their wealth and if their asset values are falling, the prospects of a comfortable retirement are receding. The average household had wealth equal to 558% of after-tax income at year-end of 2007, down from 569% a year earlier and 618% at the market peak in 1999," he concluded.
