Four in 10 U.S. workers are planning to delay their retirement, according to a survey of nearly 9,100 employees by global professional services company Towers Watson. Moreover, a vast majority of workers are prepared to spend less in retirement and are willing to pay more now for greater certainty in their future retirement and health benefits.

The survey, conducted in May and June of 2010, found that 40% of workers are planning to retire later than they were two years ago. Older workers and those in poor health comprise the largest percentage of employees planning to delay retirement. In particular, 45% of employees in poor health plan to postpone their retirement. When asked why they are choosing to retire later, more than two-thirds (68%) of older workers said to keep their health care coverage, while 62% said the higher cost of health care. Six in 10 older workers (61%) blamed the decline in the value of their 401(k) plan.

“The economic crisis has had a deep effect on employees’ attitudes toward retirement and especially on risk,” said David Speier, a senior retirement consultant at Towers Watson. “Despite the signs that some employees are saving more, spending less and reducing debt as the economy stabilizes, workers continue to have a fear that they won’t be able to afford retirement - and that will have significant implications on companies’ ability to plan their future workforce needs.”

Indeed, the survey found that nearly two-thirds of respondents (63%) are actively paying off their debts to improve their financial situation, nearly double the number (33%) in early 2009. More than half (54%) are cutting back on their daily spending, while roughly one-third (34%) are increasing their monthly savings, compared to only 19% in early 2009. The survey also noted that older workers (age 50 and above) have reduced their savings needs the most over the past 15 months while adopting more conservative saving and investment strategies.

“Despite efforts to improve their household balance sheet, it appears that older workers are also coping with their current situation by delaying retirement, reducing their expectations and possibly settling for a lower standard of living in retirement,” said Kevin Wagner, a senior retirement consultant at Towers Watson. “Unfortunately, the groups of employees that feel most compelled to take these steps are often those that can least afford to — older workers and those in poor health. Today’s challenges of retirement and health care affordability are creating a new set of ‘hidden pensioners,’ a group that otherwise is ready to retire but cannot afford to do so.”

Employees Willing to Pay More for Certainty in Benefits

The Towers Watson survey found that a majority of workers (56%) would be willing to pay a higher amount from their paycheck to ensure a guaranteed retirement benefit, compared with 46% in February 2009. Additionally, 54% of workers would be willing to pay a higher amount from their paycheck to ensure access to health care benefits if they retire before they are eligible for Medicare.

“Interestingly, not just older employees are wary. Younger workers, who generally are far less risk-averse given their retirement timeline, are also willing to forgo pay and benefits today for guaranteed and predictable benefits when they retire,” said Speier. “This issue becomes critical as employers begin to reevaluate their overall retirement benefit and health care strategies for the future.”

Other survey findings include:

- More than one-third (37%) of employees with a 401(k) plan intend to increase contributions over the next 12 months, while one-half (51%) plan to keep contributions at the same level.

- About half (47%) of respondents say they are comfortable making their own retirement investment decisions.